How will the new tax bill enacted at the end of 2017 affect buyers and sellers? It will do so in a number of ways, but there are three major changes you need to be aware of.
The first is the standard deduction. The new tax bill increases the standard deduction to $12,000 for single filers and $24,000 for joint filers. Many homeowners may decide to simply take their standard deduction rather than itemizing their deductions.
The second change is the mortgage interest deduction. The new tax bill lowers the cap on deductible debt from $1 million to $750,000. This change doesn’t necessarily apply to people retroactively, so if you obtained your mortgage prior to December 14 of last year, it won’t impact you. Going forward, though, it will impact those who take out new loans. The mortgage interest on second homes will still apply, but that also has been capped at the $750,000 limit.
The third major change is the property tax deduction. The new law limits the property tax deduction for state and local property taxes to $10,000. Prior to this, there was no limit.
To understand more in-depth how the new tax law impacts you personally, we recommend that you contact your tax preparer. if you don’t have a tax preparer, feel free to reach out to us and we’d be happy to refer you to one.
In our next video, we’ll discuss how these tax changes will affect housing prices in Southern California. Until then, if you have any questions or you’re in the market to buy, sell, or invest in real estate, don’t hesitate to give us a call or shoot us an email. We’d be happy to help you.