How does The Tax Cuts and Jobs Act impact our local real estate market? I’ll go over a couple of important things that you should know today.
The Tax Cuts and Jobs Act has been signed into law. How do these new tax rules impact our real estate market?
One thing that had very little media presence was capital gains on primary residences. As long as you’ve lived in your home for two out of the last five years, you do not have to pay taxes on the profit of your home sale. There is a cap of $250,000 for single individuals and a $500,000 cap for married couples.
One thing that had very little media presence was capital gains on primary residences. As long as you’ve lived in your home for two out of the last five years, you do not have to pay taxes on the profit of your home sale. There is a cap of $250,000 for single individuals and a $500,000 cap for married couples.
Early versions of the tax reform bill tried to do away with the capital gains exclusion completely. Then, they were going to make it so you had to live in the home for five out of the last eight years.
The good news is that the capital gains exclusion is staying exactly as it was, which is fantastic. If you bought a $200,000 house 20 or 30 years ago, it’s probably worth $400,000 to $450,000. Single people don’t have to pay taxes on $250,000 of the profit, and married couples don’t have to pay taxes on $500,000 of the profit from the home sale.
"The capital gains exclusion remains exactly as it was, which is great news for home sellers."
Investment property taxes are still deductible, as they were before. You can still write off the mortgage interest. Of course, you should verify all of this with your tax accountant, but we just wanted you to know that some of those changes real estate experts were concerned about did not go into effect.
If you are purchasing a larger or more expensive home and using a mortgage, you should be aware that the mortgage interest deduction cap has been lowered from $1 million to $750,000.
You are also now only allowed to write off up to $10,000 a year on your taxes. Although that will affect 4.1 million people nationwide, it shouldn’t affect too many people in our area.
The main thing to take away from all of this is that the capital gains exclusion is still in place, which is especially great for baby boomers looking to downsize. You will be able to sell your home and take your profit without paying tax on the capital gains.
Again, if you have questions about your specific information, please reach out to your tax accountant.
If you have any other real estate questions, please don’t hesitate to give me a call or send me an email. I would be happy to help you!
No comments :
Post a Comment