2018 has brought some new federal tax laws, and it’s important for home owners and buyers to understand how they will impact your family budget. To help clarify matters, here is an overview of the new tax laws as they relate to home ownership.
- Mortgage Interest Deduction: The mortgage interest deduction is touted as a way to make homeownership more affordable. It cuts the federal income tax that qualifying homeowners pay by reducing their taxable income according to the amount of mortgage interest they pay. In 2018 the deduction is scaled back to interest on debt up to $750,000, instead of $1 million.
- Property Tax Deduction: The former tax law eased the pain of paying property taxes by allowing qualifying taxpayers to reduce their taxable income by the total amount of property taxes paid. In 2018 the deduction is limited to $10,000 if married, or $5,000 if filing separately.
- Home Equity Deduction: The new 2018 tax law will eliminate the deduction for interest on home equity lines of credit.
- Capital Gain Rule Unchanged: When you sell a house, the capital gain is the difference between the price you paid for it and the price you sold it for. This capital gain is treated as taxable income. If you owned a house long enough, you’re allowed to exclude up to $500,000 of this capital gain as income so you don’t have to pay federal income tax on it. In 2018 there is no change to this and the old rule will remain as is.
To make sure you are maximizing the advantages of these new tax laws, it’s best to consult with your tax specialist and loan officer. Then you can be confident in your course of action, whether it’s to buy or sell your home or refinance your mortgage. If you decide it’s smart to buy or sell in 2018, call me for an update on local real estate trends and the true market value of your home. The La Crescenta-Montrose housing market continues to be hot and offers unique opportunities to maximize your return on investment.
For a complimentary value analysis of your property, contact Sharon at 818-652-7650.