New Tax Bill And Home Ownership

With today’s final passage of the tax bill in Congress, people are wondering what it means to them on a practical level, current and potential homeowners are certainly no exception.  Below I’ve provided some of those details as reported today from the Washington Post and the National Association of Realtors.

Washington Post

  • The new law increases the standard deduction to $12,000 for single filers and $24,000 for joint filers.
  • The new law caps the limit on deductible mortgage debt at $750,000 for loans taken out after Dec. 14.
  • The new law limits the property tax deduction to $10,000.
  • Home sellers can exclude up to $500,000 for joint filers or $250,000 for single filers for capital gains when selling a primary home as long as the homeowner has lived in the residence for two of the past five years.
  • The law eliminates the moving expense deduction except for members of the military.

National Association of Realtors

  • The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
  • Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
  • The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers and is not indexed for inflation.
  • The final bill provides a deduction only if a casualty loss is attributable to a presidentially-declared disaster.
  • The final bill retains the current Section 1031 Like Kind Exchange rules for real property. It repeals the use of Section 1031 for personal property, such as art work, auto fleets, heavy equipment, etc.

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