The Tax Reform Bill has been approved by both Houses and will now go to the President to sign into law.
There is a lot of detail to unpack over the coming months to fully understand all of the implications, both intended and unintended. Perhaps the most controversial piece is the slashing of the corporate tax rate from 35% to 21%. This may be considered good or bad depending on your belief in “Trickle-down Economics”.
That never-ending argument aside, I will simply outline the primary effects on personal real estate holdings:
(1) Mortgage interest deduction – – The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit.
- Homeowners who already have a mortgage are unaffected
- This deduction can still be applied to second homes
(2) Property Tax Deduction – – Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000 (vs. the current no limit)
(3) Exclusion of Gain from Sale of Your Home – – Current law is left in place on the capital gains exclusion of $250,000 for an individual and $500,000 for married couples on the sale of a home. Just as before, one must have lived in the house for 2 of the last 5 years.
Please contact me directly to discuss in greater detail!
CYA disclaimer: I’m not a tax professional, I just read a lot. Please consult a CPA or at least someone smart than me before making any tax based decisions!