Homeownership and Taxes
The tax bill passed (and signed) at the end of last year will have a significant impact on your income taxes, going forward. There's a lot to absorb, including much to do with home ownership. The full impact will depend mostly on where you maintain your primary residence, but vacation and rental properties are also affected. Here goes...
The tax bill passed (and signed) at the end of last year will have a significant impact on your income taxes, going forward. There's a lot to absorb, including much to do with home ownership. The full impact will depend mostly on where you maintain your primary residence, but vacation and rental properties are also affected. Here goes...- · The maximum amount of deductible mortgage interest has been decreased for new (after 12/14/17) mortgages. The amount is based on how much of a balance you have on your mortgage(s), now up to $750K (formally $1M). 'Old' mortgages will stay at the $1M cap. The mortgage cap still includes both first and second homes. Yay!
- · There is a now a maximum dollar amount of State and Local Taxes (SALT) that can be deducted. That maximum is $10K. This will dramatically affect those folks who live in high tax states. Generally speaking, this includes Massachusetts. The good news is that Eastham and the Outer Cape have relatively lower local taxes.
- · Capital Gains rules for the sale of your primary residence remain unchanged. This is - you get a $250K ($500K if married and filing jointly) capital gains exclusion if you sell your primary residence that you've lived in 2 of the previous 5 years.
- · IRS 1031 Like-Kind Exchanges, for residential rental properties, remain unchanged.
- · Most rules for rental and investment properties remain unchanged
- · Home equity loan interest will no longer be deductible.
Implications for Eastham Real Estate:
It's certainly difficult to predict what the impact will be, but a few observations are in order...
- · In general - most folks should see a modest reduction in their personal income taxes and,hopefully, will spend more on life and leisure (and a new home in Eastham!)
- · Folks who are heavily mortgaged may be less inclined to sell and buy again with the new $750K mortgage cap (vs the current $1M cap)
- · Folks who live in high tax states may actually pay more Federal income taxes and have less disposable income to purchase a second home (unless they choose to make their new property a rental property).
- · There are a lot of pieces and parts to the new tax code above and beyond what I have highlighted. My expectation is that it'll take some weeks for many folks to sort out what it means to them.
