Tax Deductions for Homeowners
Today is the last day to file your taxes and as a homeowner you should know how the new tax law will affect your wallet. Let’s take a look at the different deductions to consider when filing your taxes.
1. Property Tax Deduction now limitted to $10,000
Before the new tax overhaul you were able to deduct all state and local taxes on the properties you owned. With the new tax law, you are only able to deduct up to $10,000 for state and local taxes (SALT). This is particularly costly for those residents in high-tax areas like us in the state of California, where property taxes can easily go higher than the new limit.
2. Capped Mortgage Interest Deduction
Similar to the limits on property tax deductions, the mortgage interest deductions have also been reduced. In the past, you were able to deduct up to $1 million in home-related debt. This debt includes the cost of the house, the money spent on substantial improvements, or the investment made into actually building your house. Now, you can only deduct mortgage interest paid up to $750,000.
3. The increase to Standard Deduction
If itemizing your taxes is proving to be costly, you might want to consider taking a standard deduction instead, which almost doubled from previous years: $12,000 for single filers, $18,000 for heads of household, and $24,000 for married couples filing jointly.
4. Home Equity Loan Interest
In the past you might have been able to take out a home equity loan for expenses unrelated to your house and deducted the interest. Unfortunately, you can’t do that now. However, you are still able deduct the interest you’ve paid on a home equity loan that was used to make home improvements.
Take these deductions into consideration when you’re filling your taxes and speak to a Certified Public Accountant (CPA) and/or a Certified Financial Planner (CFP) to make sure you are making the right decision when it comes to your taxes and financial health.
If you need any assistance with purchasing or selling your next home I would love to help you! Feel free to contact me via my contact form :)
- Monica Singer