Tax Reform for Homeowners | H&R Block

January 25, 2018 : Gil Charney

Owning a home is one of the largest investments a taxpayer can make, and with this investment comes several tax benefits. Taxpayers who are contemplating the purchase of a home should be aware that the latest tax reform bill will change these housing benefits in a few ways.


Mortgage interest deduction tax reform

Old law: Under the prior law, taxpayers could deduct the interest they paid on a mortgage of up to $1 million. In addition, taxpayers who had home equity loans could deduct the interest if the value of the loan was $100,000 or less.

New law: The new law reduces the mortgage limit for deducting interest from $1 million to $750,000, which will reduce the value of the deduction for large mortgages. The new law also eliminates the deduction for interest on home equity loans. These changes do not affect mortgages taken out before December 15, 2017, although home equity interest is no longer deductible after December 31, 2017.


Real estate tax deduction tax reform

Old law: Under prior law, taxpayers could deduct state, local and foreign real estate taxes they paid during the tax year, with no cap on the amount.

New law: The new law caps the deduction for all state and local taxes – income, sales, real estate, and personal property taxes –  at $10,000.

These changes mean that taxpayers’ housing-related itemized deductions will now be limited. This may lead to a higher tax liability for some taxpayers. For example, taxpayers who paid real estate taxes in excess of the cap on their home can no longer deduct the full amount.

 

Casualty loss deduction tax reform

Old law: Under prior law, taxpayers could deduct unreimbursed casualty, disaster and theft losses on their residence and personal use property.

New law: Congress has repealed this deduction, except for losses on property located in a federally declared disaster area. Losses on property used in a business are still deductible.

Homeowners should be aware   these tax reform  changes, and know that the benefits of the past may no longer be available to them. For more advice regarding the impact of   tax reform for homeowners, , schedule an appointment with your nearest H&R Block tax professional. 

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Gil Charney

Gil is the Director of Tax Law and Policy Analysis for The Tax Institute at H&R Block.