The President’s big tax code rewrite has been a pretty big deal lately, and one of the major talking points, among homeowners, anyway, has been how the Tax Cuts and Jobs Act will affect things like mortgage and property deductions. So, just what does it mean for homeowners and potential buyers?
How the Tax Cuts and Jobs Act Affects You as a (Potential) Homeowner
There are a few main categories in home tax deductions, those being mortgage interest deductions, state and local property tax deductions, standard deductions, and capital gains property taxes. Here’s what changed in each.
Mortgage Interest Deductions
Under previous law, owners were able to deduct interest on mortgages up to $1million. Under new law, any loan taken after 12/14/17 is only deductible up to $750k. Prior loans, and refinances on prior loans, are grandfathered in to the higher cutoff.
State and Local Property Taxes
Previously, itemized deductions were unlimited. Now, they’ve been capped at $10,000. It might not affect owners of less valuable properties too much, but luxury homeowners will definitely feel the affects.
The standard deduction has been doubled for both single and married filers, up to $12,000 for singles and $24,000 for married couples. This reduces the need to itemize mortgage interest and property tax, and does somewhat reduce the value of tax deductions as incentives for homeownership.
Capital Gains Taxes
There were no changes to capital gains—singles are still exempt from paying taxes on gains up to $250,000 on the sale of a home, while married couples cap out at $500,000.
The Overall Results and Effects of the Tax Cuts and Jobs Act
Overall, lower-priced home buyers and owners definitely have an advantage over luxury buyers. Lower caps on deductions take away some of the incentives for homeownership that turned many renters into buyers. We may even see a slower home appreciation and price increase in the coming years.
It’s Still a Great Time to Own a Home in Central Florida!
Homeownership is really about a lot more than taking advantage of tax breaks; it’s about finding home! Buying a home creates a sense of belonging, stability, and permanence, and gives you a place to truly call your own. So don’t be deterred by changes in laws. It’s still a great time to buy a home in Central Florida! Contact me today to learn more about how owning a home can be an amazing experience and to find your dream home in Central Florida.