The new tax bill impacts many areas of our professional and personal lives but let’s focus specifically on how the new bill impacts our usage of mortgage deductions.
According to a report released on April 23, 2018, the Congressional Joint Committee on Taxation anticipates that the number of beneficiaries of the mortgage tax break will plummet by 57% this year due to the near doubling of standard deduction levels within the 2017 tax bill, effective in tax year 2018.
Already, in 2017, only 20% of taxpayers claimed mortgage deductions according to the Urban Brooking Tax Policy Center. The Center estimates that 18M households, down from 46.5M in 2017, will utilize mortgage deductions.
To make sense for payers to utilize that mortgage deduction, payers would need to have deduction levels worth more than standard deductions now available. With fewer deductions now remaining for taxpayers, this threshold is a much harder hurdle to clear.
The new tax bill stipulates new standard deduction levels for payers. Those 2018 levels are
Married couples filing jointly – $24,000, up from $12,700
Single filers – $12,000, up from $6,350
Heads of Households – $18,000, up from $9,350
Additionally, the new tax bill completely eliminated the category known as personal exemptions.
There is also a cap of $10,000 on the combined total of property, state and local taxes. Prior to this new bill, there was no cap.
The new tax bill caps all home loan exemptions at $750,000, down from the previous cap of $1,000,000.
The Internal Revenue Service has yet to release clear, publicly defined guidelines for the new tax bill. Because of the tax bill’s newness, changes, implications for both business entities and private citizens, and its current lack of clarity, we here at Harris Real Estate Coaching highly suggest you connect with a tax/financial advisor.
