How does the new tax bill affect you as a homeowner? There is a lot of good news surrounding what changes took place, and there are five specific changes you need to know about.
The first involves the capital gains tax. If you sell your home and have lived in it for two out of the last five years, you don’t have to pay capital gains tax. There was talk about changing this rule from two out of the last five years to five out of the last eight years, which would’ve made it more difficult to take advantage of this exemption, but they didn’t.
The second change involves the mortgage interest deduction, which was capped at $750,000. Previously, you could deduct interest on mortgages for up to $1 million. So, if your mortgage is above $750,000, you won’t be able to deduct any interest.
Third, the standard deduction was raised from $6,000 to $12,000 for single filers and from $12,000 to $24,000 for married couples. This change takes away some of the advantages you have when you itemize your property taxes and mortgage interest. It also creates more of a level playing field for owners and renters.
Fourth, the personal exemption, which was $4,150, was repealed. This repeal is kind of a wash, though, considering the increase in the standard deduction. If you have children under the age of 16, this deduction was raised from $1,000 to $2,000 per child.
Lastly, you can no longer deduct your moving expenses unless you’re a member of the U.S. armed forces.
With these changes, you should see your taxes go down in 2018. If you have any questions about these changes or you’re thinking of buying or selling a home in our market, don’t hesitate to reach out to me. I’d be glad to help you.