Tax Changes for Homeowners in 2018

In our most recent Podcast episode of Taxes and Beer, Dark Horse's Max Fritz and I discussed all of the pertinent tax changes that homeowners and aspiring homeowners need to be aware of. These changes impact tax year 2018 and beyond. These tax changes are as follows:

1. Mortgage loan balance limit for full deductibility is $750K (down from $1M). Interest related to mortgage balances in excess of $750K is not deductible. The interest that pertains to the first $750K is deductible. This applies to loans that originated after December 15, 2017. The old limits apply to loans that originated before Dec 15, 2017 AND refinanced loans if the original loan was made prior to Dec 15, 2017 AND the refinance does not increase the loan's balance when refinanced.
2. Interest on home equity loans is no longer deductible.
3. Property Taxes are combined with State and Local Taxes (SALT) and capped at $10K on your Schedule A (itemized deductions).
4. PMI (Private Mortgage Insurance) deduction has been extended to tax year 2017. For 2018, there is no decision at this point as it is one of the "extenders" that was not encompassed by the Tax Cuts & Jobs Act.
5. The above changes DO NOT impact rental properties, but rather only personal residences which generate deductions on Schedule A. Nothing changed in regard to Section 125 gain exclusions for primary residences that were principal residences for 2 of the previous 5 years. 1031 Exchanges still exist for Real Estate, although other property types are no longer eligible for 1031 exchanges.
6. A sizeable amount of taxpayers who previously itemized will no longer do so given the doubled Standard Deduction.

To listen to our conversation on this and a tasty beer, click here: https://itunes.apple.com/us/podcast/taxes-beer/id1331349578

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