As you know, Congress passed a new tax reform bill shortly before the end of 2017. As this is the most significant set of changes to the tax code since 1986, many are wondering how this new law will affect the housing market. Here’s a brief look at some of the changes that in tax reform that will impact homeowners, buyers and sellers alike:
Mortgage Interest: With the deductible amount lowered to $750,000, from a previous $1 million, the new tax reform, while not affecting current homeowners, will impact homes purchased in the future. Second homes are also subject to the $750,000 limit.
State and Local Tax Deductions: The maximum deductible combined property and income tax is now $10,000, both for those filing individually or jointly. Previously, there was no cap on this deduction.
Capital Gains: You can rest easy here as the new bill retains the current capital gains law of $250,000 on an individual’s sale and $500,000 for married couples – as long as the homeowner has lived in the residence for two of the last five years before the sale.
Standard Deduction: The new tax reform doubled the standard deduction - the amount you can subtract from your income before calculating taxes if you are not itemizing your return - $12,000 for single filers; $24,000 for joint filers. For many, given this new law, it will no longer make sense to itemize.
Moving Expenses: According to the new tax reform, moving expenses are no longer excludable or deductible in any circumstance – except for members of the military.
Casualty Loss Deduction: You can only deduct losses attributed to a presidentially declared disaster.
Estate Tax: The estate tax exemption has doubled under the new law - $11.2 million.
Historic Tax Credit: Used to fund renovations to landmark structures, the historic tax credit law continues to provide a 20 percent credit when a certified historic property is placed into service. However, the new law spreads the deduction over a span of five years.
Low-Income Housing Tax Credit: As Austin residents are still experiencing a seller’s market, affordable housing options are becoming increasingly more important to potential homebuyers. With this in mind, the new bill retains the four percent low-income housing tax credit, which helps to fund a third of all affordable housing options across the country.
Despite all of these changes, homeownership remains beneficial. Reach out if you have questions about buying or selling a home in the Austin area. The Resident Realty team is here to help you get more from your move!