2018 Homeowners Changes To Income Tax Deductions
There are many changes to income tax deductions for homeowners because of a new tax bill. Here is an outline to help prepare you for this coming tax season.
#1: Home Equity Loans
Prior to 2018, you could deduct interest on home equity loans worth up to $100,000 if you were a homeowner. This is no longer the case with the new tax bill. Home equity loan interest income tax deductions will no longer be available.
While homeowners with already existing mortgages can continue using the older laws, home equity loan owners don’t get that wiggle room. So if you have a home equity loan and were expecting to write off its interest next year, you are out of luck.
#2: Elimination of Moving Expenses
Prior to 2018, you could deduct moving expenses if your job required that you move more than 50 miles. However, these income tax deductions are no longer available with the new bill. The only exception is if you are a member of the Armed Forces.
#3: $10,000 Cap For Property Tax
The write-off limit is now a $10,000 deduction. In prior years, it was the total amount paid in property taxes.
#4: Lower Mortgage Interest Deduction For Home Loans
If you are planning on applying for a home loan, you should know about the new limit. Homeowners used to be able to deduct interest on a home loan up to $1,000,000. This cap will be lowered by $250,000 to $750,000. However, if you already have an existing mortgage, this change doesn’t apply to you, and you’ll still be able to write off your entire interest amount as you have in the past.
#5: Limited Casualty Loss Income Tax Deductions
Deductions for insurance casualty losses are only applicable if the president declared a disaster in your area. If you experience a loss due to a storm, be sure to check with your insurance company to determine if the area was declared a disaster.
#6: Capital Gains Exclusion Remains The Same
When selling your home, you will not owe capital gain taxes for $250,000 in profits if you are filing by yourself or $500,000 if you are filing with your spouse. The capital gains ruling has not changed for 2018 tax filers.
#7: Home Office Deductions Remain The Same
In order to qualify as a home business, you must frequently use part of your home solely for work purposes. You will need to show proof that you use your house as your primary place of business.
The deductions for a home office are calculated by using the percentage of your home dedicated entirely for business use. Be sure to keep detailed records of your business expenses including expenses for your home such as utilities and maintenance. Although you will not be able to deduct the full amount of some of these expenditures, you can deduct a portion depending on the size of your office.
For many homeowners, the increased personal deduction will offset eliminated homeowners deductions. If you have questions about becoming a homeowner in 2018, give us a call. We’d love to help you determine if buying a home is right for you.