This summary of the provisions regarding your real estate tax deductions highlights issues NOT generally covered in news reports and INCLUDES SUGGESTIONS FOR IMMEDIATE ACTION. The new tax bill was announced on Friday, December 15th, by Congress.
Note that these new rules apply to tax years beginning January 1, 2018 and ending December 31, 2025. In other words, these rules apply for the next 8 years only. This summary relates to deductions for your principle residence:
1. Deduction for Home Mortgage Interest: the revised bill provides that the home mortgage interest deduction is now capped at indebtedness of no more than $750k, but only for that incurred after December 31, 2017. For existing indebtedness ( or qualified indebtedness incurred before December 31st) the limitation is $1M.
---> If you are in escrow to purchase a residence with a mortgage over $750,000, best to close the deal by December 31, 2017.
2. Home Equity Lines: 100% of the deduction for interest paid on home equity lines of credit is being suspended for both existing and new home equity lines.
---> Call your accountant and lender this week to inquire as to the effect of rolling your line of credit into your standard mortgage.
3. State Property Tax Deduction: As in the prior versions of the bill, the deduction for property taxes, state sales taxes and state income taxes is limited to $10k in the aggregate.
---> Call your accountant this week so you can address the possibility of paying, before December 31, 2017, your full property tax liability for the 2017-2018 property tax year.
4. Exclusion of $250k/$500k gain on the sale of a principle residence: The bill announced on Friday does not address this issue at all which I assume means the current law has not changed. The House and Senate versions each rolled back these rules in different ways, so the lack of any provision addressing this issue implies that it has been dropped from the final bill. I have not seen any reporting on this issue at all.
---> Call your accountant before December 31st if you have a second home to inquire as to the rules' applicability.
The bill is scheduled to be voted on by all members of Congress on Tuesday or Wednesday this week and its passage is expected. This summary is based upon my reading of the actual bill. It is not to be deemed legal or tax advice but a highlight of tax issues as they apply to your principle residence. Please contact your attorney or accountant for advice.