3 Costly Ways Homeowner Tax Breaks Will Change in 2018

3 Costly Ways Homeowner Tax Breaks Will Change in 2018
Photo by Andy Dean Photography / Shutterstock.com

Republican leaders have been boasting that tax reform “preserves the mortgage interest deduction, providing tax relief to current and aspiring homeowners,” as their bill summary put it. But the final legislation is more complex than that.

The federal income tax deduction for mortgage interest is not among the multiple tax breaks that will disappear in 2018 due to the Tax Cuts and Jobs Act. But this deduction will be scaled back, making it less valuable for many folks.

Additionally, the tax deduction for other types of home equity debt will disappear in 2018.

Here are three key changes:

  1. Less mortgage interest will be deductible. Taxpayers with mortgages taken out on or after Dec. 15, 2017, can deduct interest on mortgage debt that totals up to $750,000 (or $375,000 for married couples filing separate returns). Under prior tax law, these limits were higher: $1 million and $500,000, respectively. Taxpayers with mortgages taken out before Dec. 15, 2017, can continue to deduct interest on the higher amounts of mortgage debt, however.
  2. Interest on home equity loans is no longer deductible. Before the changes in the tax code, taxpayers could deduct interest on home equity debt that totaled up to $100,000 (or $50,000 for couples filing separately). Such debt includes home equity loans.
  3. Interest on home equity lines of credit (HELOCs) is no longer deductible. Under the prior tax code, taxpayers could deduct interest on home equity debt that totaled up to $100,000 (or $50,000 for couples filing separately). Such debt includes HELOCs.

All three of these changes expire Jan. 1, 2026.

In other words, your 2017 tax return will be your last chance for a decade to claim the greater mortgage interest deduction or the deductions for other home equity debt interest, assuming you were eligible for them previously.

So, if you are considering buying a home, account for the lower threshold for mortgage interest when weighing whether to buy or rent.

What’s your take on this news? Sound off below or over on our Facebook page.

Popular Articles

10 Habits Happy People Use to Make Life Better
10 Habits Happy People Use to Make Life Better

If you want to walk through life with a smile on your face, try these habits on for size.

9 Houseplants That Remove Toxins From Your Indoor Air
9 Houseplants That Remove Toxins From Your Indoor Air

These plants may also do everything from reducing the amount of dust in your home to boosting your happiness.

Don’t Want to Owe Taxes After You Die? Avoid These 17 States
Don’t Want to Owe Taxes After You Die? Avoid These 17 States

In one state, the tax man is especially tough on the estates of those who shake off this mortal coil.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Comments