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4 Changes coming to Tax Deductions.

By
Real Estate Broker/Owner with Antonelli Realty 3137972

I'm sure many of the readers already know that hopw we file are taxes are going through a makeover. The U.S. tax code received a major overhaul. But not to worry. It will not affect how you file your 2017 taxes. This means this may be the last chance to take advantage of certain benefits. We should all be aware of how it will affect 2018 taxes.

 

Audrey Ference, with Realtor.com recently posted an article titled "4 Tax Deductions to Take Right Now Before They Disappear for Good". I've posted summaries of the 4 deductions she mentioned below. 

 

1. Home office
"In 2018, for non-self-employed people, the home office deduction is going away entirely," says Eric Bronnenkant, CPA, CFP, and Betterment's head of tax. If you're full-time self-employed, this deduction will continue in 2018.
So if you're a W-2 employee, start saying your tearful goodbyes to your home office deduction—but not after you've had one last hurrah filing your 2017 return. The home office deduction falls under what's called "miscellaneous deductions," and includes business expenses that are not reimbursed by your employer. Miscellaneous deductions can't exceed 2% of your adjusted gross income, but if you meet the requirements, you can take the deduction in 2017.

 

2. Unlimited property tax
One of the biggest changes for homeowners in the new tax bill is the cap on deducting property taxes. "Before, regardless of the amount, all property taxes were tax-deductible," explains Bronnenkant. Yet going forward in 2018, "the maximum you can deduct is $10,000, and that includes state and local income tax, property tax, and sales tax." That means if you pay more than $10,000 a year between your state and local income taxes, property tax, and sales tax, anything exceeding that amount is no longer deductible—which is all the more reason to rake it in right now.

 

3. Moving expenses
If you moved in 2017, You're the last to take advantage of the ability to deduct your moving expenses, provided your move meets certain requirements. "Previously, people could deduct all the expenses associated with [relocation] moving," says Priya Mishra, the managing attorney at Top Tax Defenders. "This will now be gone." The only exception going forward, according Patrick Leddy, a tax partner at Farmand, Farmand, and Farmand LLP, will be members of the armed forces. So if work took you to a new locale last year, don't forget to dig up your receipts and deduct those moving expenses.

 

4. Interest on a home equity loan for non-home improvement purposes
A home equity loan is money you borrow using your home as collateral. This "second mortgage" (because it's in addition to your original home loan) often takes the form of a home equity loan or home equity line of credit (HELOC). Traditionally, the interest on these loans could be deducted up to $100,000 for married joint filers and $50,000 for individuals. Starting in 2018, home equity loan interest is deductible only if it's used for one purpose: to "buy, build, or improve" your home, according to the IRS. So if you're dying to update your kitchen or add a half-bath, you'll get a tax break from Uncle Sam. But if you want to tap your home equity to go to grad school, well, that's on you.


More bad news: Unlike the mortgage interest deduction where loans taken before 2018 could be grandfathered into the old laws, old home equity loans have no such exemption. People with existing HELOC debt take the hit just like homeowners applying for one now.
But there is one small loophole: To reclaim this deduction, you could refinance your second mortgage and your first into a new mortgage that lumps together both debts. This essentially turns your HELOC into a regular mortgage, which means that you can deduct that interest. Just remember that refinancing can be costly, and that this new loan will be subject to the new, smaller limits on deducting mortgage interest. In loans originating on or before Dec. 14, 2017, that limit is $1 million. On loans made after that point, the cap is $750,000.


For more information or to read the full article please visit realtor.com/tax

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