I’m certain you are aware that in December, President Trump signed the Tax Cuts and Jobs Act into law. This act represents the biggest change to the tax law in 30 years. The laws going into effect in 2018 will bring significant changes. The good news is that you have a year to figure out how the tax changes will affect you individually. I thought it may be useful to highlight some of the more significant changes that will affect individuals.
- Those who are married and filing jointly have an increased standard deduction of $24,000, up from the $13000 it would have been under previous law. Single taxpayers now have a $12,000 standard deduction , up from $6500 and heads of households is now $18,000, up from $9550.
- Deduction for interest on home equity debt has been eliminated unless you are using the proceeds to buy, build or make substantial improvements to your home.
- The Personal Exemption you could claim for yourself, your spouse and each of your dependents is now gone.
- The state, local and property tax deduction now has a $10,000 cap.
- The child tax credit has doubled to $2,000 per qualifying child.
- You can no longer deduct tax preparation fees, unreimbursed employee expenses or theft & casualty losses (unless in a federally declared disaster area).
- WARNING! Be cautious with cash out refinancing. The deductibility of mortgage interest is now dependent on what the proceeds from the refinance were used for.
Most of the individual tax changes enacted under the Tax Cuts and Jobs Act will revert to current law before 2025. I will continue to keep you up to date on any impact these changes have to the residential real estate market. In the meantime, you should contact your financial planner and/or tax advisor to determine how these tax law changes may impact you personally.