John Leach & his team at Opes Advisors break down the new tax law:
The new tax law just signed into law by the President had some homeowners in high tax states standing in line at the end of the year to pre-pay property taxes. While this wasn’t their plan for the holidays, there was a lot of uncertainty as to next year and their taxes.
Let’s clear things up now with the high points of the law as they apply to homeowners and homebuyers. First a quick chart, then some great resources to get you on track for figuring taxes in the coming year.
Real Estate: How The New Tax Law Compares to The Old Tax Law
That should give you a fast start, but here are some more resources to fine-tune your tax planning.
$937,500 in purchase mortgages is the Max Deduction for Mortgage Interest with 20% down.
The mortgage interest deduction is now limited to mortgages totaling up to $750,000 for primary and secondary homes This means that home-buyers with a 20% down payment can only deduct 100% of the interest from their mortgages if their purchase prices total less than $937,500.
Property Tax Impacts in High Tax States
State income tax, sales tax and property tax deductions (SALT) are now capped at $10,000 total. This is a significant hit for many high tax state residents in high-cost areas. Consulting an accountant is the way to stay on safe ground.
Tax Plan Calculator: Estimate Your Tax Liability
What does this mean for your bottom line? The Wall Street Journal’s tax plan calculator analyzes the impact of the biggest factors in the bill, so you can estimate your tax liability for 2018 through 2027. Click here for The Wall Street Journal Tax Plan Calculator.
Common Scenarios: How the Tax Bill Will Affect 8 Families
Bloomberg shows how taxes owed on wage and pass-through income (from a business you own) will change in 2018. These scenarios may remind you of someone you know:
- The multimillionaires in New York
- The second home scenario in California
- The small business owners in Pittsburgh
- The suburban family in Westchester
- Single in Manhattan
- Married in Austin – a young couple who rents
- Median income in Oregon
- Renting in Milwaukee
Tax Workaround for Vacation Homes
Owners and buyers of second homes can potentially turn their vacation homes into an investment property by setting up a limited liability company. That allows them to write off interest and upkeep, while using the property part of the year for themselves, according to The Denver Post. Consult a tax professional for help navigating the new tax rules and how to best structure this business.
Thinking of buying a home, refinancing or just have questions? Contact us to clear things up.
*HELOC deductibility depends on whether it was “home equity indebtedness” or “acquisition indebtedness.” Acquisition indebtedness — mortgage debt used to acquire, build or substantially improve the residence — will be deductible, according to Michael Kitces, partner and director of Wealth Management at Pinnacle Advisory Group.
Opes Advisors, A Division of Flagstar Bank, is neither a law firm nor a certified public accounting firm and does not provide legal or tax advice. Consult your accountant or tax advisor for advice specific to your situation.
While Opes Advisors, a division of Flagstar Bank, Member FDIC, uses all reasonable efforts to ensure that this information is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, a division of Flagstar Bank, Member FDIC, therefore, cannot be held liable for any loss arising or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.
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