By: Leanne Potts
Published: December 21, 2018
Tax changes for 2019 change the landscape for homeowners.
Tax season is upon us once again, and to make it even more interesting this year, the tax code has changed — along with the rules about tax deductions for homeowners. The biggest change? Many homeowners who used to write off their property taxes and the interest they pay their mortgage will no longer be able to.
Stay calm. This doesn’t automatically mean your taxes are going up. Here’s a roundup of the rules that will affect homeowners — and how big of a change to expect.
Standard Deduction: Big Change
The standard deduction, that amount everyone gets, whether they have actual deductions or not, nearly doubled under the new law. It’s now $24,000 for married, joint-filing couples (up from $13,000). It’s $18,000 for heads of household (up from $9,550). And $12,000 for singles (up from $6,500).
Many more people will now get a better deal taking the standard than they would with their itemizable write-offs.
For perspective, the number of homeowners who will be able to deduct their mortgage interest under the new rules will fall from around 32 million to about 14 million, the federal government says. That’s about a 56% drop.
“This doesn’t necessarily mean they’ll pay more taxes,” says Evan Liddiard, a CPA and director of federal tax policy for the National Association of REALTORS® in Washington, D.C. “It just means that they’ll no longer get a tax incentive for buying or owning a home.”
So will you be able to itemize, or will you be in standard deduction land? This calculator can give you an estimate.
If the answer is standard deduction, you’ll be pleased to know that tax forms are easier when you don’t itemize, says Liddiard.
Personal Exemption Repealed
One caveat to the increase in the standard deduction for homeowners and non-homeowners is that the personal exemption was repealed. No longer can you exempt from your income $4,150 for each member of your household. And that might temper the benefit of a higher standard deduction, depending on your particular situation.
For example, a single person might still come out ahead. Her $5,500 increase in the standard deduction is more than the $4,150 lost by the personal exemption repeal.
But consider a family of four with two kids over 16 in the 22% tax bracket. They no longer have personal exemptions totaling $16,600. Although the increase in the standard deduction is worth $2,420 (11,000 x 22%), the loss of the exemptions would cost them an extra $3,652 (16,600 x 22%). So they lose $1,232 (3,652 – 2,420).
But say their two kids are under 16, giving them a child credit worth $2,000. That offsets the loss resulting in a $758 tax cut.
The takeaway: Your household composition will probably affect your tax status.
Mortgage Interest Deduction: Incremental Change
The new law caps the mortgage interest you can write off at loan amounts of no more than $750,000. However, if your loan was in place by Dec. 14, 2017, the loan is grandfathered, and the old $1 million maximum amount still applies. Since most people don’t have a mortgage larger than $750,000, they won’t be affected by the cap.
But if you live in a pricey place (like San Francisco, where the median housing price is well over a million bucks), or you just have a seriously expensive house, the new federal tax laws mean you’re not going to be able to write off interest paid on debt over the $750,000 cap.
State and Local Tax Deduction: Degree of Change Varies by Location
The state and local taxes you pay — like income, sales, and property taxes — are still itemizable write-offs. That’s called the SALT deduction in CPA lingo. But. The tax changes for 2019 (that’s tax year 2018) mean you can’t deduct more than $10,000 for all your state and local taxes combined, whether you’re single or married. (It’s $5,000 per person if you’re married but filing separately.)
The SALT cap is bad news for people in areas with high taxes. The majority of homeowners in around 20 states have been writing off more than $10,000 in SALT each year, so they’ll lose some of this deduction. “This is going to hurt people in high-tax areas like New York and California,” says Lisa Greene-Lewis, CPA and expert for TurboTax in California. New Yorkers, for example, were taking SALT deductions around $22,000 a household.
Rental Property Deduction: No Change
The news is happier if you’re a landlord. There continue to be no limits on the amount of mortgage debt interest or state and local taxes you can write off on rental property. And you can keep writing off operating expenses like depreciation, insurance, lawn care, and utilities on Schedule E.
Home Equity Loans: Big Change
You can continue to write off the interest on a home equity or second mortgage loan (if you itemize), but only if you used the proceeds to substantially better your home and only if the total, combined with your first mortgage, doesn’t go over the $750,000 cap ($1 million for loans in existence on Dec. 15, 2017). If you used the equity loan to pay medical expenses, take a cruise, or anything other than home improvements, that interest is no longer tax deductible.
Here’s a big FYI: The new rules don’t grandfather in old home equity loans if the proceeds were used for something other than substantial home improvement. If you took one out five years ago to, say, pay your child’s college tuition, you have to stop writing off that interest.
4 Tips for Navigating the New Tax Law
It’s that time of year again. Click on the link above and check out a complete list of 2019 Derby events.
Published: April 12, 2018
6 Simple Steps to Prep Your Home for Holiday Guests
By: Lisa Kaplan Gordon
Published: November 14, 2011
Hosting has its shares of anxieties, especially if you’re striving to make your home welcoming.
How do you know everyone will feel comfortable?
And will you ever get a chance to relax yourself?
You will if you focus on what’s really necessary. Here’s a list of steps to get your home ready — and take the stress out of hosting.
7 Hot Home Trends That Make Your Home Work for You
By: Lisa Kaplan Gordon
Published: May 13, 2011
Home improvement trends embrace energy efficiency, low maintenance exteriors, and double-duty space.
Today’s home improvement trends show that we like our houses to work harder and smarter for the money we spend maintaining and improving their value.We no longer want bigger; instead, we want space that’s flexible, efficient, and brings order to chaos.
We no longer want bigger; instead, we want space that’s flexible, efficient, and brings order to chaos.
We’re watching our wattage with monitors and meters, and guarding our weekends with maintenance-free exteriors.
Here’s a look at seven hot home improvement trends that improve the way we live with our homes
The Everything Guide to Selling Your First Home
Published: April 12, 2018
How to figure out exactly what you want, and how to work with the experts who’ll help you get it.
7 Trick-or-Treat Safety Tips that Every Homeowner Should Know
By: Oliver Marks
Published: October 22, 2012
Some Halloween tricks can really cost you.
Plenty of people love a good Halloween scare — as long no one gets hurt. And that includes your house.
Hot lights and large crowds present some real risks to homeowners. Follow these seven tips for trick-or-treat safety:
A Fall Checklist of 10 Things You Gotta Do Before Winter Sets In
By: John Riha, House Logic
Published: October 1, 2012
Such as look for roof leaks before the first winter snow. Preventative maintenance is key.
When the last of summer’s heat is a faint memory, and you’re pulling out your hoodies more than your shorts, it’s time to tackle a few simple chores that’ll make winter more pleasant and prevent some nasty surprises next spring.
This fall checklist helps: