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I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.
At the time of publishing this, the President hasn’t yet signed the bill. But, it’s as good as a law and we fully understand all the provisions now.
National Association of Realtors (NAR) had this to say about the bill’s impact on housing
“As a result of the changes made throughout the legislative process, NAR is now projecting slower growth in home prices of 1-3% in 2018 as low inventories continue to spur price gains. However, some local markets, particularly in high cost, higher tax areas, will likely see price declines as a result of the legislation’s new restrictions on mortgage interest and state and local taxes.
P.S. – I don’t entirely agree with NAR’s assessment about the impact on the home prices. But more on that in my next blog post.
These are the top 5 ways the bill will impact the current and future homeowners when it comes to housing/mortgages.
Mortgage Interest Deduction
- The final tax bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.
- The law offers an exception for people who were under contract to buy a home before 12/15/2017 as long as they were scheduled to close by 1/1/2018.
- Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
- Homeowners are also grandfathered for future refinances. They may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest.
Interest paid on HELOC
- The final bill repeals the deduction for interest paid on home equity debt (commonly called HELOC) through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
Read the detailed post – Interest paid on HELOC may still be tax deductible
Property Tax Deduction
- The former tax law allowed unlimited property tax deductions. Beginning in 2018, the deduction will be limited to a total of $10,000 for the cost of property taxes and state or local income taxes or sales taxes (you are screwed if you live in a high property and income tax state like California).
- Under the former law, you could deduct some moving expenses when you moved for a new job. Not anymore. Beginning 2018, only active duty members of the armed forces can.
Capital Gains and Investment Properties
One bright spot (or two). Rules pertaining to capital gains and tax savings allowed on investment properties remain the same.
Almost till the very end, the proposal was to change the capital gains waiver from the current 2 out of the last 5 years occupancy rule to 5 out of the last 8 years. That would have meant homeowners living in the property far longer to avoid capital gains of up to $500,000 (married filing jointly couples) in profits after selling their homes.
P.S. – I am not a CPA, nor do I play one on TV or internet. Please consult your tax advisor since the applicability of tax laws may be different for different situations.