The Tax Cut & Jobs Act has made its way through legislation, and changes for homeowners are on the horizon. The National Association of Realtors® (NAR) worked throughout the process to help protect homeowners, real estate investors, and industry professionals. The goal was to retain existing benefits as much as possible, and help ensure an ongoing, thriving real estate market for the nation.
The final Act included legislation which may help and/or hinder property owners, depending on specific circumstances. Here’s a summary of the main impacts anticipated by the Tax Cut & Jobs Act:
- Tax Rate Reductions: In general, individual and married filers will pay a lower tax rate. There are 7 tax brackets which now have lower rates, from 10%- 37%, depending on income. These decreases are on average 2-4% less than the prior rates, so many tax filers can expect a decrease in their taxes.
- Capital Gains Exclusions on Primary Residences: The current law in effect will remain. Thanks to the support of the NAR, homeowners still need to live in their primary residence for a minimum of 2 out of 5 years, not the proposed 5 out 8 years, to qualify for the Capital Gains Exclusion.
- Mortgage Interest Deductions: This is where some homeowners could see a bigger loss. The new mortgage interest deduction maximum is now $750,000 for new home loans. This means a homeowner can deduct the interest paid on no more than $750,000 of their home loan debt. If you close on a home after 12/14/17, these new deduction limits will apply.
- Other Deduction Changes: There were also changes made in state and local tax deductions, standard deductions, casualty disaster loss, and moving deductions. The Personal Exemption has been eliminated, which could have some homeowners paying more in taxes. Fortunately, state and local tax deductions still remain, albeit at a lower amount. The new maximum deduction is now just $10,000. When it comes to deducting losses from a disaster, these can only be applied towards presidential-declared situations. Moving expenses are no longer deductible, unless you’re with the military.
- Deductions Retained, Credit Increased: The Tax Cut & Jobs Act originally included eliminating both the medical expense and student loan deductions. Due diligence with support from the NAR helped these tax breaks remain intact. On the plus side, for families with children aged 16 and younger, the child tax credit has doubled to $2,000.
Understanding how you may be impacted by the new tax laws will help you get the most out of your deductions and credits.* Learn more with this in-depth summary published by the NAR. When you are ready to sell or buy property in York County, you’ll want a team you can rely on. The Jim Powers Team of local, experienced Realtors® is here to help you through the entire process. Our goal is to help you find the perfect home with complete satisfaction. Visit our website to learn more, then contact us or give us a call at 717-417-4111, to get the conversation started.
*The above information is a general overview, and not intended to provide any kind of advice or speak to a specific situation. If you have questions about how these or any other tax changes may impact your situation, we encourage you to contact your personal tax adviser.