What Homeowners Should Know About Tax Reform

Here’s what homeowners need to know about the Tax Cuts and Jobs Act that was signed into law December 2017.

Mortgage Interest Deduction

  • The limit on deductible mortgage debt was reduced from $1 million to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.
  • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
  • Interest paid on home equity loans is only deductible if the proceeds are used to substantially improve the residence.
  • Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.

Deduction for State and Local taxes (SALT)

  • If you itemize your tax return, you can claim up to $10,000 total for state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers.
  • If you prepaid your 2018 state and local income taxes in 2017, you cannot deduct those taxes

Capital Gains Exclusion

  • Remains unchanged at $250,000 for single filers and $500,000 for joint returns if the house was lived in for two of the last five years.

Housing market Impact

  • California’s median home price is projected to increase 3.2 percent in 2018. Overall, home sales in California are expected to grow in 2018.
  • The supply of available homes for sale will be slightly impacted, as homeowners may delay trading up/down to their next home.
  • Overall, the California housing market is expected to see a decline of 0.3 percent in active listings in 2018.

Download the Info Sheet Here

Download (Homeowner-Tax.pdf)