New tax legislation was signed into law at the end of 2017, and it included some significant changes for homeowners. These changes took effect in 2018 and do not influence your 2017 taxes. Here’s a brief overview of this year’s tax changes and how they may affect you*.
The amount of mortgage interest you can deduct has decreased.
Under the old law, taxpayers could deduct the interest they paid on a mortgage of up to $1 million. The new law reduces the mortgage interest deduction from $1 million to $750,000. These changes do not affect mortgages taken out before December 15, 2017.
The home equity loan deduction has changed.
The IRS states that, despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labeled. The Tax Cuts and Jobs Act of 2017, enacted December 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.
The property tax deduction is capped at $10,000.
Previously taxpayers could deduct all the state, local and foreign real estate taxes they paid with no cap on the amount. The new law limits the deduction for all state and local taxes – including income, sales, real estate, and personal property taxes – to $10,000.
The casualty loss deduction has been repealed.
Homeowners previously could deduct unreimbursed casualty, disaster and theft losses on their property. That deduction has been repealed, with an exception for losses on property located in a federally declared disaster area.
The capital gains exclusion remains unchanged.
Homeowners can continue to exclude up to $500,000 for joint filers or $250,000 for single filers for capital gains when selling their primary residence as long as they have lived in the home for two of the past five years. An earlier proposal would have increased that requirement to five out of the last eight years and phase out the exclusion for high-income households, but it was struck down. Find out more about 2018 tax reform.
How does tax reform affect your plans for buying or selling a home?
The changes in real estate related taxes may change your strategy so make sure to give me a call and we can figure it out.
*Please consult your tax advisor if you have any questions about how the new tax reform impacts you
- Historically, the choice between renting or buying a home has been a tough decision.
- Looking at the percentage of income needed to rent a median-priced home today (28.9%) vs. the percentage needed to buy a median-priced home (15.7%), the choice becomes obvious.
- Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!
The cost of renting vs buying a home today have to consider many factors. Low interest rates have made homeownership possible for many.
It’s a great for first time homebuyers as well as homeowners looking to move up. When you compare renting to buying a home, buying makes more sense financially and in the overall wealth building.
Home prices have been appreciating in double digits year after year. The longer you wait to buy, you will end up spending more money. The best answer to when is the best time to buy, it is, buy now.
Here are some fun and family friendly events in Seattle & the North End.
1 Everett Sausage Festival everettsausagefest.com
1 NW Tea Festival in Seattle nwteafestival.com
5 Brew @ woodland Park Zoo zoo.org
6 Marysville Brew & Cider Fest marysvilletulalipchamber.com
6-8 Seattle Home Show seattlehomeshow.com
5-15 Seattle Made Week seattlemade.org
8 Seattle Children’s Festival nwfolklife.org
14 Ballard Art Walk visitballard.com
14 Bothell Beer Festival bothellchamber.com
28 Cascade Cheese Festival in Seattle centralcoop.coop
28-29 Pumpkin Bash & Trick or Treating @ Woodland Park Zoo zoo.org
29 Run Scared 5k @ Seward Park runscared5k.com
31 Troll-o-ween in Fremont fremontartscouncil.org
Have a fun and safe October!
If there is anything I can help, with feel free to contact me.- Kasia