Mortgage interest deductions
Tax-paying homeowners will recall their mortgage company issues a statement every January showing how much interest has been paid against their loan. Anyone with a mortgage knows the accruing interest payments are much higher than principal payments, especially in the first few years of paying the loan. It’s a great deduction, and it offsets costs to make the dream of homeownership more achievable for many Americans.
Changes made to mortgage interest and property tax deductions under the new tax bill impact existing homeowners with mortgages over $1 million and anyone looking to purchase a first or second home until 2026 with a total mortgage debt that’s more than $750,000. In order to be fully deductible, the mortgage(s) held by the taxpayer must be under $750,000.
What Can You Do?
– If your mortgage is under $750,000 (or $1 million, if you purchased your home before mid-December 2017), these changes won’t impact you. Continue to review your mortgage interest deduction statement with your tax professional.
– If you’re looking to buy a second home, keep in mind that your total mortgage debt will need to be less than $750,000.
– Limit the size of your total mortgage debt to $750,000 by increasing your down payment at the time of purchase or purchasing a less expensive home.
– Make extra mortgage payments against the principal to counteract the accruing interest.
Property Tax Deductions
You’ll still be able to deduct property taxes in 2018 – including state and local taxes – but the big change is that your maximum tax deduction can only be up to $10,000. This means, if you were previously filing your taxes with individual deductions for state taxes, local taxes and sales taxes, the total amount you can deduct is now capped at $10,000.
How Does This Affect You?
– For homeowners in high-tax areas around the country, state and local taxes commonly exceed $10,000. You won’t be able to claim it in entirety, so take the benefits of renting versus buying into consideration.
– Unless your state, local, and sales taxes are less than $10,000, you won’t be able to claim them in full.
– The new law is the same whether you’re filing as single or married.
Depreciation on Non-Residential Properties or Rental Properties
Deduction rules will stay the same for those who have nonresidential properties, including rental properties or dwelling properties. Depreciation recovery on such properties remains at 39 years for nonresidential property, 27.5 years for rental property and 15 years for qualified improvements such as restaurant, leasehold and retail spaces
As always contact your CPA to see how the new rules will impact you personally and for all your Mortgage needs contact The Scott Miller Team at Nations Lending
at 612-751-7268.
SCOTT MILLER - Branch Manager | NMLS #90280
CALL US: (612) 751-7268
STOP IN: 201 Jackson St. Suite 204, Anoka, MN 55303
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