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Goldburd McCone LLP
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Property and taxes: How did the new tax law change the benefits?

Homeowners can view property ownership as an investment strategy. A homeowner can justify this investment a number of different ways. In the past, one of the motivating arguments in favor of owning property was the tax break. But is that still the case?

The Tax Cuts and Jobs Acct (TCJA) made a lot of changes to the tax law. This includes some changes to portions of the tax code that impact the taxation of property. Here are three examples:

  • Home mortgage interest deduction cap. Prior to the TCJA, a home owner could deduct mortgage interest for a home purchase of $1,000,000 plus an additional $100,000 for equity in a primary residence plus one additional home. The TCJA reduced this cap to $750,000.
  • Restrictions on refinancing deduction eligibility. In the past, homeowners could deduct the mortgage interest after refinancing their home. This new re-fi loan could be used to cover other debt, such as college tuition. The TCJA removes this flexibility, specifically stating that only home equity loans used to improve, buy or build a residence qualify for the deduction.
  • Removal of casualty loss deduction. The TCJA also led to the repeal of the deduction for personal casualty losses. This deduction allowed homeowners with a home damaged or destroyed by a sudden or unusual event to deduct these losses. Qualifying events included tornadoes, fires, hurricanes and floods.

Savvy taxpayers should also note the changes made to the standard deduction may make the property tax changes a non-issue. The TCJA effectively doubled the standard deduction. As such these changes could be a non-issue for a number of home owners as the tax benefits tied to property are only available to those who itemize their deductions.

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