Tax season is here and your 2017 return is the last time (until 2026) to take advantage of certain deductions. If you missed the previous post on personal exemptions and the new tax law, you can find it here. Another thing that will be changing is the deductions you will be allowed to take each year. Below are just two examples of the recent changes you might see on your 2018 return.
State and Local Tax Deductions
Previous rules allowed filers to deduct the full amount of either: (1) their state income taxes or (2) their state and local taxes as well as (3) property taxes.
Under the new bill, all three are lumped together and the deduction is capped at $10,000.
For borrowers in areas with high taxes, not being able to fully write off these deductions could result in a higher tax bill.
For mortgages originated before December 15, 2017, filers can deduct interest paid on home loan balances of up to $1 million. This $1 million cap applied to the mortgage on a primary residence plus one additional home.
For mortgages originating after December 15, 2017, this cap drops to $750,000. However, beginning in 2026, the cap will revert to $1 million, no matter when the debt was incurred.
Additionally, under former rules, interest on home equity loans or lines of credit was tax-deductible. However, this deduction will no longer apply starting in 2018. This could make home equity loans a less attractive way to borrow for home improvement, college, debt consolidation or other purposes. This is not a permanent change – the home equity deduction will return in 2026.
If you are still struggling with how the new tax bill will affect you, Polston Tax can help you understand the changes and how best to use the new rules to benefit you. Call us today at 844-841-9857 or click here to schedule a free consultation.