Last Friday, the Republican lawmakers released the final version of the tax reform bill. Today, lawmakers voted for the bill then sent it to President Trump’s desk. This new tax bill can impact the home ownership process or your current mortgage payments.
With this new tax bill, interest for the first $750,000 of mortgage debt can be deducted on a newly-bought home which is a decrease from the current $1 million threshold. Despite this bill, current homeowners will not be affected by the decreased cap.
Potential homeowners who want to live in expensive cities can be affected by this cap because some mortgages can be higher than $750,000. Fortunately, this tax reform bill has made home buying more affordable for homebuyers looking at homes around the median home price of $203,400, according to Zillow.
There may be an increased pressure to lower home prices based on the deduction, making home owners reluctant on selling.. Others might be tentative to upgrade to a more expensive home because the cost of the house might be too high to utilize the deduction. If current homeowners want to purchase a second home, the decreased deductions will be applied to the second home’s mortgage.
If homeowners want to claim their mortgage interest deductions, homeowners can itemize their taxes. With the new tax reform bill’s standard deduction, less Americans have to itemize this upcoming tax season.
Previously, taxpayers were able to fully deduct their income, sales, and state and local property taxes. Under this new bill, those same taxpayers are allowed up to $10,000 to deduct on their taxes. People, who live in high-tax states like California and New York, can potentially see a rise in what they owe during tax season.
Contact a loan officer today to discuss your homeownership process.