As you likely know, Congress passed a tax reform that went into law on January 1, 2018. Several provisions in the bill are directly tied to homeownership. There has been a lot of confusion and misinformation around these amended provisions, as the initial policy that the House of Representatives passed differed from what was actually put into law. While we are not tax advisors – and we do encourage you to consult with your tax advisor – we hope these answers will help clear up some confusion.
IS MORTGAGE INTEREST STILL DEDUCTIBLE?
Yes, the mortgage interest deduction remains intact for all current homeowners on mortgages up to $1,000,000 ($500,000 if married filing separately). For all new mortgages after December 14, 2017 interest will only be deductible on loans up to $750,000 ($375,000 if married filing separately).
CAN I STILL DEDUCT MY HOME EQUITY LOAN (HELOC) INTEREST?
No, in most cases interest on home equity loans is no longer tax deductible for taxable years beginning after December 31, 2017 and through December 31, 2025. There is an exclusion that may allow you to write off the interest if the proceeds of the HELOC are used to substantially improve the property. We encourage you to consult with your tax advisor.
CAN I STILL DEDUCT MY PROPERTY TAXES?
Taxpayers can deduct up to $10,000 in state and local taxes, which include property taxes. You will no longer be able to write off all of them if your state and local taxes exceed $10,000.
IS THERE STILL A CAPITAL GAINS TAX EXEMPTION ON THE SALE OF PRIMARY RESIDENCES?
Yes, this remained unchanged. Capital gains are exempt up to $250,000 ($500,000 if married) on the sale or exchange of your principal residence if you have lived in the home for the last 2 out of 5 years.
ARE MORTGAGE CREDIT CERTIFICATES (MCCS) STILL AVAILABLE?
Yes, MCCs were not impacted.
CAN I STILL WRITE OFF MOVING EXPENSES RELATED TO A CHANGE IN MY JOB?
No, job-related moving expenses are no longer tax deductible unless you are a member of the armed forces on active duty that moved due to military orders.
It’s important to note that the above tax write-offs only have value if you will be itemizing your deductions. Unfortunately, the new tax reform raised the standard deduction to $12,000 for taxpayers filing individually and $24,000 if married filing jointly. This means, many taxpayers may not be itemizing their deductions going forward.
Tax Reform Law Chart: Prior Law vs. New Law (Published by the California Association of Realtors® on 12-28-17)
The Modified Home Mortgage Interest Deduction (Published by Forbes.com on 12-28-17)
3 Changes to Itemized Deductions Under Tax Reform Bill (Published by HRBlock.com on 12-22-18)