The new tax law rules which were signed into law last week has some important changes for homeowners. Mortgage interest will still be tax deductible but only on mortgages up to 750K. Property and state taxes will see be deductible but only up to 10,000 dollars worth.
The standard deductions have been raised. Which means that fewer people will want to itemize and get the deductions because they will pay less in taxes by taking the standard deduction. The standard deduction for 2018 has almost doubled from 2017 to $12,200 for single filers and $24,400 for joint filers.
The deductibility of capital gains on the sale of a primary residence has been left in place. Taxpayers will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains when they sell their primary home, as long as they’ve lived there for two of the past five years.
It is hard to tell at this point what kind of an impact any of this will have on the local real estate market where people generally do not need 750K mortgages. People with the combination or high property taxes and high state income taxes may want to look for some new tax deductions.
Right now home sales are strong and even record-breaking. Home values continue to climb as the number of homes on the market remains low. Homeownership rates are about 5% below the peak of 77.3% in 2002 and are climbing.