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New 2018 Tax Law Implications on Current and Future Homeowners

February 08 2018
February 08 2018
2018 Tax Law Implications (4)

Just days before Christmas 2017, Congress approved and President Trump signed in law sweeping tax cuts and tax reform laws that would go into effect on January 1, 2018. “The Tax Cuts and Jobs Act” has thrown everyone for a loop. Inundated with calls about how to navigate the changing tax landscape, tax specialists, CPAs and financial advisors themselves are still trying to fully understand the new tax laws!

Obviously, the big question on most people’s mind is, ‘How will the new laws affect me?’.

Well, as any tax expert (who actually takes your call) will tell you, that really depends on several things, like where you live, how much you make, whether you own a home and how much you spent on purchasing that home.

We expect that the uncertainty of how the new laws will affect taxpayers will cause some hesitation in the real estate market. Since the IRS has yet to make needed clarifications on the interpretation of some of the major changes, most people have had a “wait and see” attitude.

However, since so many of our own clients have been asking whether it’s still a good time to buy or sell, we decided to put together a list of key changes that can affect current and future homeowners:

2018 New Tax Law Key Changes:

  • Lower marginal tax rates for individuals and couples. The tax rate schedule retains seven brackets with slightly lower marginal rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

  • Higher standard deduction of $12,000 for single individuals and $24,000 for joint returns.

  • But eliminates personal exemptions!

  • Home mortgage interest deductions limited to $750,000 for new loans taken out after December 14, 2017. Current loans of up to $1 million are grandfathered and not subject to the new law. Homeowners may refinance mortgage debts existing on December 14, 2017 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.

  • $10,000 limit on itemized deduction for the total of state and local property taxes and income or sales taxes, for both single and married filers.

  • Higher estate tax exemption, now $11.5M per person.

  • Can use up to $10,000 per year of 529 funds for K-12 tuition costs.

  • An increase of child tax credit to $2,000 from $1,000, per child under the age of 17.

  • 20% deduction for pass-through business owners. *lots of confusion about the definition of this one.

According to Brian Lombardo of Gateway Financial Advisors, there is no need for taxpayers to panic. Based on his understanding most taxpayers will not be significantly impacted. However, he does add that those people that will be most impacted by the new laws are: (1)  new home buyers, (2) potential move-down sellers and (3) high-income earners with a large estate. If you fall into any of these groups, he recommends seeking the advice of a qualified tax advisor.

For more detailed information about the New 2018 Tax Laws, read this NAR summary.

If you’d like more insight and advice as to whether to sell or buy a home now, request a free session with us to evaluate the real estate market in your neighborhood.

The materials provided here are for general informational purposes and should not be relied upon as legal, financial or tax advice. It is our recommendation that every taxpayer should review their specific situation with regard to tax consequences, with their own attorney or tax advisor.


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Antoine Chenoweth

November 17, 2018 6:22 AM

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December 21, 2018 12:53 AM

Well, as any tax expert scott properties will tell you, that really depends on several things, like where you live, how much you make, whether you own a home and how much you spent on purchasing that home.