There are some pretty big changes coming for homeowners as a result of the tax reform legislation enacted last December. The available deductions and exemptions may change depending on whether you itemize your deductions in 2018 or take the standard deduction. The effect of the new tax legislation will vary depending on a variety of factors such as income level, whether or not you have a vacation home, and which state(s) your home is in. Below is a brief overview of some of the changes and the impact they may have on homeowners. Consult a tax expert to find out how the changes will affect you personally.
Mortgage Interest Deduction – This lowers the cost of homeownership by letting owners deduct the interest they pay on their home, second home, and vacation home (so long as they aren’t rented out for more than two weeks a year) from their taxable income. The new tax law also lowered the cap for mortgages eligible for interest deduction from a million dollars to $750,000.
Mortgage Insurance – The deductibles for mortgage insurance costs and the value you receive from a short sale were not renewed in the new tax law.
Property Taxes – In the past, property taxes at the state and local level were deductible. The new law limits deductible property taxes to $10,000 per year.