What does the new tax bill mean for you as a homeowner?
December 30, 2017
Here are the highlights:
– Mortgage-Interest Deduction Capped at $750k – This is down from the current $1 million threshold. Current homeowners will remain unaffected as this will only apply to new loans. What does this mean for us in the Denver Metro market? Not much in that only a relatively small percentage of loans in our market exceed this threshold. Pricier markets such as New York and San Francisco where a majority of mortgages exceed $750k will feel more effects from this change.
– State and Local Deductions Capped at $10k – This total can come from any combination of property, income, and sales taxes. Even though in our robust housing market Denver residents have seen their property taxes increase in recent years, we are fortunate to live in a state with relatively low property taxes (8th lowest in the nation according to a WalletHub study of 2017 taxes by state). Similar to the Mortgage Interest Deduction cap, this change will have little to no effect a majority of Denver residents.
– Perhaps the most significant item that remains UNchanged is that taxpayers can still exclude up to $500k for joint filers ($250k for single filers) from capital gains when selling a primary home as long as the homeowner has lived in the residence for two of the past five years. Earlier versions of the tax bill called for this timeframe to increase the live-in requirement to five out of the last eight years.
– Standard Deduction Increases – For single filers the standard deduction increases to $12k from $6,350 and for joint filers to $24k from $12,700. These increases provide some taxpayers with less reason to itemize (which one must do if they wish to claim the mortgage interest deduction). It will be interesting to see the eventual data of how many Americans this helps to simplify their taxes.
If you have any further questions about these tax changes or your personal real estate outlook, please let me know.