Tax Cuts That Will Give You Money Back
Despite some new tax benefits for homeowners, the National Association of Realtors (NAR) is expecting a slower growth in prices of homes by 1-3% in 2018. Some new restrictions on mortgage interests and state and local taxes may cause some price declines in high cost/high tax areas.
While not everyone will see decreases in taxes, many will see some decrease in taxes. The new tax act is keeping seven brackets but changed them to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The government has planned this to spark investments, jobs and economic growth with hope to derail government aided programs due to this decreased tax rate.
One of the best things for homeowners to look forward to, is that the standard deductions have double for both single-filers and joint-filers. So, for a single-filer it will be a $12,000 standard deduction and $24,000 for joint-filers. If you used to itemize your taxes, consider doing the math to see if you’ll benefit more by going with the standard deduction than by itemizing, it may save you more money this year.
For new homeowners or soon-to-be homeowners, the new mortgage interest deductions likely won’t hurt you. The government is capping the amount you can claim on deductible mortgage debt at $750,000. You can also deduct a home-equity loan as long as the proceeds are used to extensively improve the property. An upside of the new law is that you can also deduct mortgage interest on second homes as long as it’s under the limit of $750,000 as well.
Property tax deduction limit is now being capped at $10,000. This will mainly be of impact to those in high cost/high tax areas. This limit shouldn’t hurt too many middle class or lower income class, with the average family spending about $2,500 in property taxes on their homes and vehicles in the 27 states that have vehicle taxes according to WalletHub.
Home sellers will be able to write off up to $500,000 when filing jointly and up to $250,000 when filing single. You’ll have to have been living at this residence for two of the past five years. Another way to dodge capital gains taxes is by recapture, which is taking the gains from the sale of the property and reinvesting it into another property within the fiscal year.
Estate tax deduction has skyrocketed under the new law. It will allow $11.2 million of the total estate to be exempt from taxes.
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