New Homeowner Tax Tips

by Silver Spoon Properties & Lending 03/04/2019

Thinking of cashing in on income-tax savings now that you're a homeowner? With new tax laws in place for tax-year 2018, new homeowners might not receive what they expect. The Tax Cuts and Jobs Act (TCJA) that went into effect for tax years 2018 through 2025 changed up some of the write-offs homeowners typically expect.

Interest

Homes purchased after January 1, 2018, through December 31, 2025 qualify for an itemized deduction for interest on a mortgage up to $750,000 used to improve or acquire a new home that you live in, or $375,000 each if your file married but separate. That is lower than the previous law that allowed for $1 million and $500,000 respectively. Additionally, you used to be able to deduct interest on home-equity debt up to $100,000 ($50,000 each if married filing separate) that no longer is deductible at all. 

Local Taxes

Limits for deductions for state and local taxes are just $10,000 combined or $5,000 separate. If you live in a high-property-tax state, you’ll likely see a change in your refund due to this change.

Standard Deduction

A significant difference you'll see, to nearly everyone's advantage, it the increase in the standard deduction. A standard deduction does not require any "deductions" to claim it other than that you exist as a potential tax-payer. These new amounts are $24,400 for married filing joint couples and $18,350 for heads of household. If you file separately or as a single, your deduction is $12,400 just for being you.

This means though that if you relied on itemized deductions to decrease your taxes due, they won't count unless they are in excess of your higher standard deduction. The rest does not actually provide an income tax reduction benefit. So careful itemization (interest, property taxes, gifts to charity) to push you over that $24,400 threshold is where you’ll see some benefit.

When calculating your write-offs, be aware that the percent reduction is only for the amount you make above the $24,400 (or $12,400 for singles), not for your entire income. So if you’re deductions amount to $36,000 and you’re in the 24-percent bracket, your increase bottom line is only 24% of $11,600, ($36,000 minus $24,400) or $2784, not $8,640. 

While homeownership still is a great deal for many buyers, the tax deductions for smaller mortgages may not add up to what long-time homeowners may still believe. If you have questions about how your home purchase impacts your taxes, talk to your real estate professional.

About the Author

Author
Silver Spoon Properties & Lending

Carlo Honanian is the Broker and President of Silver Spoon Investments. Carlo started off his career as a Vice President with Chase Bank in the early 1990s with extensive experience in residential and commercial loans, banking, compliance, human resources, sales, clients services,and branch management. Carlo’s real estate career was added to his portfolio of expertise and services in 1999 and has continued on till today. Carlo takes great pride in listening to his client’s needs and providing outstanding service with integrity. Getting training in extensive management skills and superior customer service by one of the top banking institutions around, Carlo has carried the same mentality to the field of real estate and financing in creating and operating Silver Spoon Properties and Lending. Carlo’s vision for creating this company was simple, to be a one-stop-shop for clients to handle all of their real estate and lending needs. Carlo’s extensive experience in loan origination, real estate sales, bank management,and clients services is a distinct advantage to his clients. With the broad knowledge and understanding of residential and commercial real estate and lending, added with a tremendous focus on providing superior customer service and experience is what you can expect with Carlo and Silver Spoon Properties and Lending.

Silver Spoon Properties and Lending is also a Certified Short Sale & Foreclosure Brokerage (SFR) through the National Association of Realtors. Take advantage of our experience and training in dealing with the Short Sale and Foreclosure market today. Please call us today to discuss buying, selling, or financing your property or for a free consultation to discuss your individual scenario. We also offer property management and leasing services. Whether you are a first time home buyer or a seasoned property investor, we can cater to you specific needs. Consider us your one stop shop for residential and commercial real estate sales, loans and financing options like SBA, Commercial, Hard Money, and Residential Mortgages.