I am considering purchasing a home and was wondering what impact the new tax bill could have on me as a homeowner?
Bobby, this is a great question that we’ve been hearing from a lot of people. With President Trump signing the Tax Cut and Jobs Act Bill in December, many homeowners and prospective buyers are wondering how the new bill could affect them.
In this post, we will discuss the Mortgage Interest Deduction, something that many view as a benefit to homeownership.
Contrary to what you may think, much of the interest you pay on your home will still be tax deductible. With the new tax code, the amount of interest debt that is deductible has dropped from 1 million dollars down to $750,000. However, if you purchased your home prior to December 14, 2017, debt up to $1,000,000 is grandfathered in. So, only homeowners whose mortgage exceeds $750,000 would be affected, and they wouldn’t be able to deduct interest on the debt OVER the $750,000 cap. So, the reality of it, is that very few individuals will lose this benefit of homeownership and the ones who do, will only lose the deduction on the interest on the $250,000 debt over the cap.
If you have a home equity line that interest is no longer deductible (at least through 2025), however, that interest will be deductible if it was used for home improvements.
Stay tuned as we’ll be posting more information about this topic.
It’s important to stress that we are REALTORS®, not Tax Accountants, so we strongly recommend that you consult with your accountant to further understand how this bill affects you. This is not to be taken as tax advice, just some general information regarding the bill.