It’s tax season once again, and whether you’ve owned the same home for a while or you purchased a new home in 2018, you probably have some questions about the tax deductions available to homeowners under the new Tax Cuts and Jobs Act (TCJA) passed by Congress beginning with the 2018 tax year. This guide will help you plan for your deductions so you can reduce your tax liability.
Deducting mortgage interest
There are some new regulations governing how you deduct mortgage interest as a result of the TCJA. Now, married couples filing jointly can deduct the interest on up to $750,000 of mortgage debt, or $375,000 for single or married filing separately filers. Under the previous tax code, the maximum debt amounts for deducting mortgage interest were $1 million and $500,000 respectively.
Deducting property taxes
Homeowners can still deduct a certain amount of state and local property taxes paid under the TCJA, but as with mortgage interest, the amounts have been reduced. For households filing as married filing jointly, state and local combined property tax deductions may not exceed $10,000, or $5,000 for all other filing categories.
Claiming the standard deduction
Another big change implemented under the TCJA is that the standard deduction has been increased, and many homeowners who are used to itemizing their deductions will be surprised that taking the standard deduction may now be more advantageous for them. If you were planning in itemizing, or on the bubble before purchasing a new home, then homeowner tax credits will likely save you money. Otherwise, you might be better off claiming the now $24,400 standard deduction for married couples, or $12,400 for single filers.
New guidelines for home equity loans
Under the TCJA, home equity loan interest is deductible if you are specifically using the money to improve a residence, and your combined debt balance from your mortgage and home equity loan does not exceed $750,000 for joint filers (half that for others).
Filing your taxes may be more complicated this year, but buying or selling a home doesn’t have to be. No matter where you are in your real estate journey, the real estate agents and team members at The Parker Group are here to help you navigate the complexities of the process and get the best possible deal for you. Reach out to us today, and together we can begin planning the next step in your life.