The Tax Cuts & Jobs Act (TCJA) was approved by Congress December 20, 2017, and signed by President Trump on December 22, 2017. The Act impacts individuals and businesses in a way not seen in over 30 years. With most provisions effective 2018, it lowers individual and corporate tax rates, repeals numerous tax credits and deductions, enhances the child tax credit, boosts business expensing, and impacts the Affordable Care Act (ACA) by effectively repealing the individual mandate.
The following are TCJA law changes that may impact homeownership:
Home Mortgage Interest: Under current law, taxpayers can take a combined acquisition and home equity indebtedness interest expense deduction on $1,100,000 of debt. The new legislation only permits the deduction of interest on acquisition indebtedness not exceeding $750,000 and repeals the additional interest deduction for home equity indebtedness through 2025. Effective for taxable years after Dec. 31, 2017.
Home Mortgage Interest Grandfathering: Debt incurred on or before Dec. 15, 2017 is grandfathered into the limitations under current law. Taxpayers who entered into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchase such residence before April 1, 2018, are also eligible for the current higher limitations.
State and Local Taxes: The new legislation limits the itemized deduction for state and local taxes to $10,000 for the aggregate sum of real property taxes, personal property taxes, and either state or local income taxes or state and local sales tax. Currently, each of those state and local taxes is a separate itemized deduction with no limitation. Â Effective for taxable years after Dec. 31, 2017, including a clause that prohibits a deduction in excess of the $10,000 limitation for 2018 state and local taxes actually paid in 2017.
The exclusion of gain on the sale of a principal residence, although discussed, remains unchanged.
Please contact Sandy Abalos to discuss any area of the new tax law that interests you.
