Both chambers of Congress have now passed the new tax bill, and its the first overhaul in more than 30 years. The National Association of REALTORS worked throughout the tax reform process to preserve the existing tax benefits of homeownership and real estate investment. Many of the changes reflected in the final bill were the result of the engagement of NAR and its members, not only in the last three months, but over several years.
The tax bill has been passed with all of its pros and cons. Last minute changes to the bill include the following improvements for real estate.
-Capital Gains Exclusion. In a huge win for current and prospective homeowners, current law is left in place on the capital gains exclusion on $250,000 for an individual and $500,000 for married couples on the sale of a home. Both the House and Senate had sought to make it much harder to qualify for this exclusion.
-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. The house bill sought a reduction to $500,000.
-State and Local Tax Deductions. Both property taxes and State and Local income taxes remain deductible, although with a combined limit of $10,000. Both the House and Senate bills sought to to eliminate the State and Local income tax deduction altogether.
All individual provisions are generally effective after December 31, 2017 for the 2018 tax filing year and expire on December 31, 2025 unless otherwise noted. The provisions do not affect tax filings for 2017 unless noted. Individuals should consult a tax professional about their own personal situation.
You may benefit from pre-paying your 2017 real estate/property tax bill before the end of the year. With the caps on deductibility of state and local income and property taxes at $10,000 for tax year 2018 and going forward, but that cap does not apply in 2017. If your real estate tax bill is expected to exceed $10,000 in 2018, you may strongly benefit from pre-paying property taxes due in 2018 right now before year end.
If you have any questions about how this may affect your decision to buy or sell real estate in the coming year, reach out to your Real Estate Resource, the Finn Team: www.Finn-Team.com or firstname.lastname@example.org.