One of our preferred lender partners, Natalie Salins, wrote up a great blog post on the influence of the new tax bill on homeowners and future homeowners. The details shared below are especially important if you owe over $1 million on your mortgage, but even if you don’t we suggest you read more about whats in the new homeowners tax bill.
- If you purchased a house before December 16, 2017, you will be allowed an itemized deduction for the mortgage interest you pay up to $1 million.
- For purchases after that date, that cap is lowered to $750,000.
- Refinancing of “grandfathered mortgages”, that were acquired prior to 12/16/17 can retain the deduction limits, but not beyond the original mortgage’s term/amount (some exceptions apply for “balloon payment” mortgages).
- An itemized deduction can be made for a principal and second residence mortgage up to a combined total of $750,000 (or up to $1 million if grandfathered prior to 12/16/17).
- This means that the interest you pay on your loan for a 2nd home, if these loan limits are exceeded will not be deductible in 2018.
- However, if you rent your vacation home, you can write off the costs associated with that activity, which would include a portion of mortgage interest and property taxes.
- Interest paid on home-equity loans will no longer be deductible beginning in 2018. In other words, if you already have a home-equity loan or line of credit, this is the last year you can write off the interest paid on it for a while.
Capital gains exclusion
- 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, as long as they have lived there for two of the previous five years.
- Property, state and local income taxes face a combined $10,000 deduction limit.
This material is for informational purposes only. This material does not provide individually tailored investment advice or offer legal, tax, regulatory or accounting advice. We recommend you contact your financial planner or tax advisor for details and more information. This information was first published by Natalie Salins with Movement Mortgage.