On Friday, the final edition of the tax bill was unveiled by the Republicans and homeowners need to know about some new restrictions going forward. Lawmakers are hoping to have a voting on the new bill in the coming week, after which it will be sent to the president’s desk.
Let’s have a quick look at the key changes and what they might mean for existing and future homeowners:
Reduced loan interest deduction
Here’s an alert for all new homebuyers-you would now only be allowed interest deduction on the initial $750,000 of your loan debt when buying a home. This indicates a drop from the present $1 million limit, yet it is more than the threshold of $500,000 proposed by the House in the November tax overhaul.
There is good news for current homeowners though: the reduced cap would not affect them in any way. It is reported that for a certain section of the homeowners, this interest deduction has been effective in making real estate purchases more affordable.
Although the average home price all over the country is $254,000 presently, buyers in certain cities are facing price tags that are a lot higher.
Less Need for Tax Documentation
It is crucial for homeowners to inventory all taxes in order to claim interest deduction and mortgage. However, the final tax bill has nearly doubled the original deduction. Hence the number of Americans expected to tabulate taxes will be far less in April.
Realtor.com’s senior economist, Joe Kirchner, recalls that during his time, they would simply work with the prescribed standard deduction when buying a house. But when the house was bought, they would start itemizing since loan interest deductions were very important. But with the introduction of increased standard deduction, it is unlikely that many home-buyers will itemize.
No Changes in Tax Breaks
The Senate, as well as the House Bills were originally wanting to scale down a tax benefit for homeowners who decided to sell their property for a profit. It is reported that taxpayers would still be in a position to eliminate up to 500,000 dollars from profits after they sell off a primary house. The only condition is that they should have lived in the house for at least two years in the previous five years.
Former tax overhaul proposals might have caused an increase in this live-in condition, raising it to up to five years in the past eight years.