Planning for 2019 Tax Season
The tax season may be over, but this is the time to plan for next year. The Tax Cuts and Jobs Act took affect January 1, 2018 and with it some significant changes to the tax code. Sweeping reforms will directly effect the Real estate market across the country. Regardless of whether you are a current St. Louis homeowner or future homeowner, the changes in the tax code will have a direct impact on your tax deductions.
Changes In the Tax Cuts and Jobs Acts
- Mortgage Interest Deduction Reduced – The mortgage debt interest on your first and second home is tax deductible. Starting in 2018, the total value of the mortgage debt has been reduced from $1 million to $750,000. This applies only to new loans, either through refinance or purchase. Homes purchased before 2018 are still limited to the $1 million threshold.
- Interest From Home Equity Loans Limited – Interest paid for a home equity loan is now only deductible if used to make improvements to the home.
- State and Local Property Tax Deduction Limited – Prior to The Tax Cuts and Jobs Act, tax payers could deduct both state income taxes along with property taxes from their federal income. The new law now limits this deduction to up to $10,000 total.
- Standard Deduction Increase – Beginning in 2018, the standard deduction for those who do not itemize is increased from $12,000 to $24,000. With a higher standard deduction, the incentive to own a home for the tax benefits is decreased and might have a negative effect on the real estate market.
Tax payers and homeowners will be effected by The Tax Cuts and Jobs Act. Those living in states with high state income taxes will have the hardest impact. Experts are mixed about how the St. Louis real estate market will react to the changes. All are in agreement that there will be adjustments which must take place. If you are a current homeowner or future homeowner, understanding the new rules will allow you to make informed decisions about your own real estate needs. The IRS has provided additional up to date information here.
*This article is not intended to provide legal or tax advice. Please consult with a tax professional before making any decisions related to this topic.