Tax Reforms: Impact on Real Estate Tax Deductions
Three changes to U.S. tax code resulting from the recent tax reform laws could impact your real estate tax deductions on your federal taxes. First, the tax deduction for state real property taxes has been capped at $10,000. Thus any amount you pay in real estate taxes above $10,000 will not qualify for a deduction. This change impacts over 4 million Americans. The second change caps interest deductions on purchase mortgages loans (loans used to purchase a home) and only allows the deduction for a loan with a balance of $750,000 or less. But loans between $750,000 to one million dollars that existed prior to the new law are grandfathered in and one still can deduct the interest paid on those loans. The third and probably the most significant is the elimination of the tax deduction for interest on home equity loans. Before the new law, interest on home equity loans was deductible on loans up to $100,000. If you pay off credit cards or your car loan with a home equity loan, you can no longer deduct the interest from the home equity loan. This change impacts $448 billion dollars in loans nationwide. There is no grandfathering for home equity loans that predated the tax reform law. The one potential exception is if the home equity loan was used for construction or improvements to your home.
At Hymson Goldstein Pantiliat & Lohr, PLLC, we strive to help our clients understand and plan when there are changes in the law that impact them.
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