Recent changes stemming from the Tax Cuts and Jobs Act may feel, as taxes sometimes do, a bit confusing. Luckily, Pickett Street and their preferred mortgage lender Cody Touchette of Caliber Home Loans are here with the breakdown of how recent tax changes will affect you.
Keep in mind that most of these changes will not affect you until it’s time to file 2018 taxes (the taxes you will file in 2019). For more information about the Tax Cuts and Jobs Act, Cody recommends this helpful link.
1. Standard deduction.
According to the Washington Post, the new tax law increases the standard deduction to $12,000 for single filers and $24,000 for joint filers. This means that, for many homeowners, it will no longer make sense to itemize deductions. Zillow broke it down for the Washington D.C. area: under the old tax law, it made sense for 98 percent of homeowners to itemize, while under the new law, it only makes sense for 64 percent of homeowners to itemize.
2. Mortgage interest deductions.
If you bought your home on or after December 15th, 2017, then you can claim a maximum interest of $750,000 for each secured primary residence. If you bought your home before December 15th, 2017, then the old law still applies, and you can refinance mortgage debts up to $1 million and deduct the interest. Just be sure that the new loan does not exceed the amount refinanced.
For secondary homes, Cody notes that “interest deductions…are still deductible, and subject to the same $750,000 total limit if purchased after December 15, 2017.”
3. State and local property taxes.
The new tax law limits the amount you can deduct for property taxes to $10,000. Under the old law, the amount you could deduct for property taxes was unlimited.
According to the Seattle Times, the average taxpayer doesn’t reach the limit of $10,000 for property and sales tax deductions. In 2017, the average property tax bill was $5,660 in King County and even lower in Snohomish and Pierce counties. The state’s average sales tax deductions were about $2,650.
4. Capital gains exclusion.
Joint filers who are selling their primary home can exclude up to $500,000 for capital gains, while single filers who are selling can exclude up to $250,000. Keep in mind that you need to have lived in this residence for two of the past five years.
5. Home equity.
According to Cody, “if you’re getting a home equity loan or line of credit, keep in mind that the Tax Cuts and Jobs Act has largely eliminated this interest deduction.”
6. Moving expenses.
Unless you are a member of the military, under the new tax law, you may no longer deduct for moving expenses.
An important side note: we’re not tax experts, so to receive official tax advice, get in touch with a tax professional or CPA. However, the Pickett Street team is still here to help you with your real estate questions.
Or, to get in touch with Cody Touchette at email@example.com.