How 2018 Tax Laws Change Homeownership And Mortgages

How 2018 Tax Laws Change Homeownership And Mortgages

Purchasing a home has always been part of the American dream. The new tax laws have brought some changes that will affect this. Here's how:

1Mortgage Interest Deduction   

The mortgage interest tax deduction is used as a way to make home ownership more affordable. It cuts the federal income tax that qualifying homeowners pay by reducing their taxable income by the amount of mortgage interest they pay.   In 2018, the deduction has cut back interest on debt up to $750,000, instead of $1 million.  You may deduct the interest you pay on  debt up to $750,000 ($375,000 if married filing separately).

2- Property Tax Deduction   

This deduction is now changed from allowing qualifying taxpayers to reduce their taxable income by the total amount of property taxes they paid to deducting  a total of $10,000 for the cost of property taxes, and state and local income taxes or sales taxes  ($5,000 if married filing separately)

3- Home Equity Deduction  

Apart from mortgage interest deduction,  homeowners were able to deduct interest paid on home equity debt for reasons other than to buy, build, or substantially improve your home.   If you borrowed from a home equity line of credit to pay tuition, the interest you paid was tax-deductible. The 2018 tax law now eliminates this deduction.

4- Moving Expenses 

 Under the former tax law, you could deduct some moving expenses when you moved for a new job; in 2018, only active-duty members of the armed forces will be allowed to deduct moving expenses

5- Mortgage Interest Deduction for 2nd Homes

You may deduct interest on mortgage debt on your primary home and a second home. The new law keeps this part of the former tax law in place, although it reduces the amount of eligible mortgage debt,  same as primary homes...up to $750,000 ($375,000 if married filing separately) 

6- Unchanged Capital Gain Rule 

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 the 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. (The exclusion is capped at $250,000 for married taxpayers filing separately.) You must have owned the home, and used it as your primary residence, during at least two of the five years before the date of sale. You cannot have used this exclusion in the two years before the sale of the home. 


   

    


Kathy Walsh Headshot
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Phone: 267-718-0908
Dated: January 22nd 2018
Views: 32
About Kathy: A lifelong resident of Philadelphia, Kathy has a great appreciation and understanding for the city...

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