Tax reform and effects on real estate
The Tax Reform will have many effect on real estate and real estate transactions. No matter what income bracket up are in you will likely be effected by the changes to the tax structure. It is important to be aware of what is in the law and to follow up with you accountant or tax professional to see how you may be effected. There are many different facets to look at that may have an effect on housing and real estate ownership. Here is a summary:
The Standard Deduction will be increased to $12,000 for individuals and $24,000 for married filing jointly tax returns.
Mortgage interest is still deductible. There was a great concern that this would end, but we still have it. There is a limit now for interest on mortgages up to $750,000 for mortgages taken out after December 14, 2017. Existing mortgages up to $1million are grandfathered.
Interest on Home Equity Loans are deductible as well, provided the funds are used to substantially improve the property. There is a repeal on home equity debt interest through December 31, 2025.
Interest on mortgages on second homes remains deductible on the same mortgage amounts as the primary residence.
State and Local Taxes (SALT)
State and local taxes or SALT allows for a total combined deduction of $10,000.
Casualty Loss deduction
Allows for the deduction only if the disaster has been declared by the President.
Most people tax rates are expected to decline. And Capitol Gains tax remains the same with a range of 15% to 25% depending on the tax bracket.
The child credit is doubled to $2000 for children 16 years and younger.
Moving expenses are no longer deductible unless you are a member of the Armed Forces
Cost Recovery and 1031 exchanges
Cost Recovery and 1031 exchanges laws remain the same. This is 39 years for non-residential real property, 27.5 years for residential rental properties and 15 years for leasehold improvements.
Business income from Pass-through entities
Business income from pass-though entities changes dramatically. It is expected to pass into law that there will be a 20% deduction of the income. (for individuals and couples making $157,500 and $315,000 respectively or less. Above this level the benefit is phased out.
For real estate agents:
For Real estate agents, they likely can receive the 20% deduction
Verhouse and its authors do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.