How Does The New Tax Bill Impact Homeowners?
Wondering how the new tax bill will affect homeownership? Here are some good insights from Amanda S. Davidson. Though, I don't know if we really know all the effects as of yet.
How Does The New Tax Bill Impact Homeowners?
Many homeowners, buyers, and sellers are wondering how the tax reform legislation that passed in December is going to impact them. As with most things in real estate – it depends. There are several items in the bill that affect the housing market. Below is an overview of what it means for homeowners, buyers, and sellers.
Mortgage Interest Deduction – through the end of 2025 new home buyers will only be able to deduct interest on the first $750,000 of a mortgage. This is a decrease from $1 million. The deduction cap will revert to $1 million in loan value in 2026. This has no impact on EXISTING mortgages – only new home buyers. It’s important to remember that these are loan amounts and not sale prices.
Home Equity Loan Interest Deduction – the new bill suspends the interest deduction on home equity loans until 2026. This is a change from deductions being allowed for loans up to $100,000. That said, there is a caveat – interest on a home equity loan can be deducted if the proceeds are used to substantially improve the home.
State and Local Property Taxes – with the new legislation the property tax deduction is limited to $10,000. There was previously no cap. ATTOM Data Solutions estimates that approximately 90,000 households will be impacted by this change in the DMV area.
Capital Gains – no change, the deduction for up to $500,000 for joint filers or $250,000 for single filers from selling a primary home remains. The requirement that the home was the filer(s) primary residence for at least two of the last five years also remains.
If you're interested in learning more about the new legislation, read our full article on how the tax bill impacts homeowners.
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