We've been asked a few times what effect the tax code changes have for 2018. Here's 5 things you should be aware of for the new year.
Tax Code Changes That Can Impact the Housing Market:
1. The standard deduction has essentially been doubled.
The new tax code has nearly doubled the standard deduction. For single filers, your standard deduction increases from $6,350 to $12,000; for married folks, it's gone from $12,700 to $24,000.
2. The state and local tax deduction (including property taxes) has a cap.
The state and local tax deduction, or SALT, remains intact for you itemizers. There is now a $10,000 cap though. Previously, filers could deduct an unlimited amount for state and local property taxes, plus income or sales taxes.
3. The mortgage interest deduction has been lowered.
Current homeowners are in the clear. Moving forward, however, if you are buying a new home you will only be able to deduct interest paid on up to $750,000 of mortgage debt. That's down from $1 million.
4. Home sellers who turn a profit keep their tax break.
The same rules apply for those who are selling their primary residence. Own it for 2 out of the last 5 years and no capital gains tax on the 1st $250,000 gain for single people or $500,000 for married folks.
5. The deduction for moving expenses is also gone.
With some exceptions for members of the military, most of us can no longer deduct moving expenses when we have to move for work as we once could.
At least this will not affect you in 2017
If you are looking for a bright side, these changes will not impact your 2017 taxes. We will have to take a wait and see approach to what, if anything, this does to impact our local housing market.