Video-5 Home, new tax law & deductions.
Hello, this is Lei Jiang, a licensed real estate agent in Ohio and also a real estate attorney with 10 years expense, licensed in Ohio, NY, Michigan & Illinois. Today, I will talk about home, new tax law & deductions.
We know that being a homeowner has its advantages. Under the new tax law, standard deduction increases mean fewer Americans will itemize their filing. According to Tax Policy Center, 27 million taxpayers will no longer need to itemize their taxes. Still it is good to educate yourself on deductions so you can make a better decision. Today I will focus on 5 major deductions.
1) Mortgage interest
This is the most common tax advantage. Under the new law, interest paid throughout the year is deductible on your taxes for mortgages up to $750,000 for loans issued after Dec. 14, 2017. The previous limit was $1 million.
In the same way, the interest on a refinanced mortgage can also be deductible, following the similar rules.
2) Equity loan interest
In line with the mortgage interest, the interest on a home equity loan or home equity line of credit can also be deducted. Following the new law, if you borrow against the equity in your home, the interest deduction is subject to the same $750,000 limit for total mortgage debt and only applies when the money borrowed goes toward the home itself.
3) Property taxes or real estate taxes
Under the new law, from 2018 onward, the total deduction for your property taxes is capped at $10,000. Except people in states with high property taxes, such as California and New York, the majority of homeowners won’t be affected because their property taxes are below the limit.
4) Home office deduction
The law changed regarding to this deduction. So for 2018, deductions are limited to self-employed workers. Plus, your home office cannot be in a guest bedroom or other space used for a dual purpose, and it must be used regularly.
5) Capital gains exclusion
This exclusion stays the same. Basically, if you’ve lived in the property as your primary residence two years in the last five years … you can make $250,000 profit as a single person, tax free, or $500,000 as a married couple.
We have a more detailed blog on our website on tax deductions. Make sure you take advantage of these tax perks.