THE TAX BILL IS SIGNED INTO LAW, WITH ALL ITS PROS AND CONS. WE WANT TO HIGHLIGHT THE IMPACTS ON HOMEOWNERSHIP – HERE THEY ARE:
1. Starting 2018, the interest paid on loans for vacation homes is no longer deductible. POTENTIAL ACTION – consult your tax advisor or CPA and talk to us about restructuring your mortgage debt to investment properties first, then primary residence and last on vacation homes. IMMEDIATE ACTION – consult your tax advisor or CPA as you may consider making your January 2018 vacation property mortgage payment before December 31, 2017 to get the interest deduction in 2017 before it goes away.
2. Property, state and local income taxes face a combined $10,000 deduction limit. IMMEDIATE ACTION – consult your tax advisor or CPA but many professionals are recommending that if your 2018 property, state and local tax will exceed $10,000, then make part or all of your 2018 property tax before December 31, 2017 to make sure you get this deduction before the limit takes place.
3. While the deduction limit pertaining to mortgage interest drops to $750,000 of debt on your primary residence, it remains $1 million for homes purchased before Dec. 15 of this year. POTENTIAL ACTION – talk to us about restructuring your mortgage debt on your primary residence and/or shortening the term if you are not getting a benefit from itemized deductions after the increase in the standard deduction.
4. Taxpayers will continue to be able to exclude up to $500,000 ($250,000 for single filers) from capital gains taxation when they sell their home, if they have lived there for two of the previous five years. POTENTIAL ACTION – make sure you meet the two of previous five years requirement when considering the sale of the residence or consider the benefit of keeping the property as an investment property