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Your Home and The Tax Cuts and Jobs Act of 2017

Author: Kelley Treon, September 30, 2019

The Tax Cuts and Jobs Act of 2017 changed several aspects of individual taxation as it relates to a taxpayer’s primary residence or second home. Many of the changes were phased in for 2018, so it’s still pretty new. Here is reminder of the main points that relate to homeowners:


Real Estate Taxes

The itemized deduction for state and local income taxes, sales tax, and property taxes are limited to $10,000 in total. Former law did not impose a limitation of taxes specifically (total itemized deductions were limited for high AGI taxpayers; taxes not deductible under alternative minimum tax system).


Mortgage Interest

Mortgage interest on a new (existing debt was grandfathered) mortgage for a primary residence or second home is deductible up to $750,000 of indebtedness. Former law allowed the deduction for indebtedness up to $1 Million.


Home Equity Interest

Home equity interest is no longer deductible unless the loan is used for home improvements. This interest is subject to the overall mortgage loan limitation of up to $750,000.


Gain on Sale of Primary Residence

This provision was unchanged. A taxpayer can exclude up to $250,000 ($500,000 for married taxpayers) of gain on their personal residence. The exclusion may be used once every two years (long ago there was a once per lifetime exclusion). Taxpayer must have lived in the home two of the last five years. A reduced exclusion is available for those who make a job related move and do not meet the two year residence requirement.


Kelley Treon, CPA- Principal

Lonicera Management, LLC

ktreon@lonicerainvestments.com

September 23, 2019

*This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.


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