Are you wondering what impact the upcoming tax reform will have on you or your clients? While the tax reform bill has not been finalized, this article, which appeared on CNBC, fairly summarizes some things that homeowners might consider, given what we know. Below are a couple of my personal thoughts on statements within the article:
- Property taxes: Both the House & Senate bills would allow property tax deductions up to $10,000. This is great news for most folks, IF they continue to itemize their deductions. However, since a proposed change is to increase the standard deduction, this would eliminate a lot of homeowners in 2018. For those folks, it might be worthwhile to consider pre-paying their property taxes, especially if they expect to fall under the standard deduction threshold next year.
- Home mortgage interest: The House & Senate bills differ in how they would treat mortgage interest. However, both bills do look to reduce the deductibility of home mortgage interest, particularly in either home equity loans or in loans on secondary (vacation) properties.
- Selling your home: There might be modifications to the Section 121 tax exclusion, which allows homeowners to exclude up to $250,000 ($500,000 for married couples) on the sale of their primary residence, if they meet the ownership & use criteria. Currently, that is having owned & lived in the home for 2 of the past 5 years…both bills would change that to 5 of the past 8 years. This might be an incentive for folks looking to sell to close before year end.
If you know of any client who wants to learn more about their tax situation, please feel free to put them in touch!