With the new tax law passing, there are a few new rules that may affect you if you own a home or are looking to purchase.
Mortgage Interest Deduction
Prior to the tax reform, homeowners could deduct the interest on their mortgage debt up to $1 million. The new law cuts the interest deduction on mortgage debt up to $750,000 for new mortgages. Current homeowners are not impacted by this change. Also, homeowners are no longer allowed to deduct the interest they pay on home-equity debt. It is important to note that the home equity line of credit (HELOC) deduction is NOT grandfathered.
The overhaul curbs how much homeowners can deduct for paying property taxes. The previous tax law allowed taxpayers to deduct state and local income or sales taxes and also property taxes. Property, state and local income taxes face a combined $10,000 deduction limit. With the standard deduction doubling, tax rates dropping, and a $10,000 max on property tax deduction next year it could make sense to tae as many deduction as possible in 2017. Consider asking your CPA or tax preparer if it makes sense for you to make an early payment on your property taxes in December instead of January.
Capital Gains on Home Sales
One tax break that remains in place is a rule that lets homeowners shield some of the profits they make selling their home from capital-gains taxes. For individuals, the break applies to up to $250,000 in profits on the sale of a principal residence; for married couples, it is up to $500,000.