For homeowners, the future is a fuzzy one thanks to Republican tax overhauls. One thing is sure: they will not save much money on taxes. The bill has a number of changes which could make owning a home a much more expensive proposition for a few taxpayers. The bill not only modifies the existing deduction on mortgage interest payments, it also restricts deductibility of the state and property taxes, and also taxes imposed on local income to combined $10,000. States like California and New York, which have high property tax and home prices, the change brings with it much steeper bills from 2018.
No Prepayment with Exceptions
Homeowners cannot prepay the local income taxes and the state taxes in 2018 to take advantage of present laws. The bill particularly forbids such an event from occurring. Property taxes, however, can be paid before time. If any homeowner does so, it is important to check whether it is feasible or not with their financial adviser. According to tax experts, the sole method to take advantage of all deductions linked to home ownership is to itemize tax returns. This is as the Republic' tax bill nearly equals standard deduction for all the taxpayers, the combined sum of all the available deductions should not exceed the new itemized amount.
Owners of expensive properties and if that property is the primary residence, will benefit from this bill. As per the bill, homeowners who have purchased their immovable asset prior to December 15, 2017 will be eligible to continue the interest rate deduction they presently pay on a mortgage debt up to a maximum of one million dollars. If the house is purchased after that date, the cap gets reduced to $750,000. This is applicable only for mortgage of the primary residence. It means that the interest paid for the loan taken for a vacation house, or a camper, or recreational vehicle, will not be deductible after 2017.
Tax Break Chances
In the case, the vacation home is taken for rent, like the property is rented out for a few days or months of the year, it is possible to write off expenses linked with that particular activity. These include a part of the property taxes and mortgage interest. Other than this, when the mortgage interest cap goes back ti one million during 2027, independent of the time of home purchase, no provisions exist which may bring back tax break for the second homes.