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2018 Tax Changes: How it Affects You

Ah, tax season! There’s nothing quite like it. If you’re a homeowner or looking to purchase a home this year, you’re probably interested in the latest tax changes that will affect your real estate investment. We understand it can be confusing to navigate these changes on your own so we’ve put together some of the changes that may impact you the most.

The new tax law is designed to put more money in the hands of consumers by lowering the tax rates and increasing the standard deduction. The higher standard deduction will mean that fewer individuals will itemize deductions. So, what does this mean for you?

  • For taxpayers with few itemized deductions: this means taking the standard deduction will exempt twice as much of your income from federal taxation.
  • For those who currently itemize: it may now make more sense to take the standard deduction, and have less income subject to federal taxation.

If you do decide to itemize, keep in mind that beginning in the 2018 tax year, you’ll no longer be able to deduct:

  • State income and property taxes above $10,000 per year in total. For filers in higher tax states, this maximum will limit how much you can deduct on your federal taxes for state tax payments.
  • The maximum mortgage amount for which interest can be written off has been lowered from $1,000,000 to $750,000. This doesn’t apply to existing financing in place (before December 15, 2017).
  • Interest on home equity money you borrow for non-renovation purposes is no longer tax deductible. We recommend checking your particular situation with a tax expert.
  • While the benefit of tax write-offs may become less important, a home could become an even better investment in 2018. In addition to the investment benefit, a home also provides protection against inflation and forced savings plans, while renting provides none of these benefits.

Now, let’s talk about tax brackets for a minute because some of the biggest changes are in this area. The new law has adjusted the rates in most of the tax brackets and the income range for each bracket has been adjusted as well. With these tax changes, current homeowners and those looking to buy a home in 2018 can look forward to having more money in their wallet to be used toward a down payment or a larger home.

Here’s a cheat sheet to see the changes in the tax brackets from 2017 to 2018 for both single filers and those who are married and filing jointly.

tax brackets (002).png

It’s also important to note that the tax policy for capital gains remains unchanged from the previous law—which states that homeowners must live in their home for two out of the past five years to qualify for the exclusion. This is good news for homeowners looking to list their home on a more flexible timeline without the fear of paying a large amount in taxes.

With this being the first major tax change since 1986, its impact will be uncertain for quite some time. Most of these changes will remain until after 2025 so it’s always good to know your options and how to plan for the years ahead.

Churchill Mortgage doesn’t give tax advice and we highly recommend you work with a tax professional to discuss your specific situation.

 The information contained herein is general in nature and based on authorities that are subject to change. Churchill Mortgage guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Churchill Mortgage assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations.

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