How Does the New Tax Law Affect Real Estate?

In December 2017, Congress passed a new law that significantly overhauled the tax code. As of now, however, many American taxpayers are unaware of how these tax changes will affect them. Specifically, you may wonder, “How will the new tax reform legislation
affect the property I own or the property I may sell?” Here, we’ll give you a brief overview of how the new tax bill will impact real estate.

You may be able to exclude more capital gains.

If you have lived in your home for at least two of the last five years, you may be able to exclude more money when selling your primary residence. If you’re filing as a single person,
you will be able to exclude $250,000; if you’re filing jointly, you can exclude $500,000.

Your mortgage interest deductions will change.

On mortgages taken out after December 14, 2017, the law will cap the limit on deductible mortgage debt at $750,000. What this means is that even if you have a mortgage that is more
than $750,000, you will only be able to deduct the loan at a maximum of $750,000. Mortgage deductions on second homes face the same limit.

For those of you who had a mortgage of greater than $750,000 prior to December 14, you will continue being able to deduct interest on your loan up to a million dollars. Further, if you refinance your mortgage debts now, you will still be able to deduct the
loan up to a million.

Local and state property taxes will be capped.

For 2018, state and local taxes will be limited to $10,000. Don’t try to get ahead now, either — the bill doesn’t let you prepay these taxes now.

Filing for casualty losses will become more difficult.

In earlier versions of the tax code, filers could claim property losses more leniently. However, the new update indicates that losses can only be claimed in the event of their destruction
when the president declares a disaster.

You will no longer be able to claim a deduction for moving expenses.

Previously, if you moved during the year, you could claim a deduction for moving expenses. This deduction has now been eliminated unless you are an active member of the military.

The tax code changes affecting real estate and property are considerable and far-reaching. Nevertheless, if you pay attention to the changes in restrictions for buying, selling and moving, you can be better informed about how the bill will change your financial
situation.

(Note: We are not tax experts. You should not rely on this article to make tax decisions. Consult with your tax advisor related to any tax decisions.)