As tax time quickly approaches we want to share some helpful information about the Tax Cuts and Jobs Act to assist in answering any questions your clients may have about filing 2018 taxes. The updates below come directly from the IRS.
The Mortgage Interest Deduction:
- For mortgages taken out after Dec. 15, 2017, only interest on up to $750,000 in acquisition debt is deductible ($375,000 if married filing separately). This includes primary and secondary homes.
- Interest on up to $1,000,000 in acquisition debt incurred on or before Dec. 15, 2017 is still deductible ($500,000 if married filing separately).
- Acquisition debt is any debt incurred acquiring, constructing or substantially improving a qualified residence and is secured by the residence.
The interest deduction on home equity debt is eliminated:
- This is any debt that is secured by a qualified residence other than acquisition debt.
- Interest on HELOCs used to purchase a qualified residence is deductible since the portion of the loan used for the purchase would be acquisition debt.
- No Changes will be made to current law that excludes capital gains on the sale of a home.
- The standard tax deduction will nearly double for single filers from 6.350 to $12,000, and for joint filers from$12,700 to$24,000 and for heads of households from $9,350 to $18,000.
- The new law eliminates the deduction for personal exemptions and the personal exemption phase-out.
- State and local income tax, property tax and sales tax (in the aggregate) will now be limited to a maximum deduction of $10,000.
- The current mortgage revenue bonds and mortgage credit certificates (MCCs) are preserved under the new tax laws.