The Tax Cuts And Jobs Act What It Means For Homeowners

The Tax Cuts And Jobs Act What It Means For Homeowners

The Tax Cuts and Jobs Act - What it means for Homeowners

The National Association of Realtors (NAR) lobbied hard for both real estate agents and consumers. While they remain concerned that the overall structure of the final bill diminishes the tax benefits of homeownership and will cause adverse impacts in some markets, they were able to gain some important improvements throughout the legislative process. The final legislation will benefit many homeowners, homebuyers, real estate investors, and real estate agents as a result. The NAR helped save the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property.

As a result of the changes made throughout the legislative process, NAR is now projecting slower growth in home prices of 1-3% in 2018 as low inventories continue to spur price gains. We currently do not know the impact for Outer Banks real estate. However, The Outer Banks Association of Realtors reports a 5% increase in residential home prices in 2017 (Nov. 2016 thru Nov. 2017) and 28% increase for condominiums. Residential inventory is down 5% and land inventory is down 10%.

Here are the NAR’s comments regarding two of the more important previsions effecting homeowners. Click on http://l.enews.realtor.org/rts/go2.aspx?&-H43-Bb-1Jq-1eFq3-1p-GiZz-1c-1Z75h-1nITs1&-H43-Bb-1Jq-1eFq3-1p-GiZz-1c-1Z75h-1nITs1%7c24370343%7c5074%20%20for%20the%20full%20NAR%20article.

Exclusion of Gain on Sale of a Principal Residence

The final bill retains current law. A significant victory in the final bill that NAR achieved.

The Senate-passed bill would have changed the amount of time a homeowner must live in their home to qualify for the capital gains exclusion from 2 out of the past 5 years to 5 out of the past 8 years. The House bill would have made this same change as well as phased out the exclusion for taxpayers with incomes above $250,000 single/$500,000 married.

Mortgage Interest Deduction

The final bill reduces the limit on deductible mortgage debt 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. Neither limit is indexed for inflation.

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.

The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) 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.

The House-passed bill would have capped the mortgage interest limit at $500,000 and eliminated the deduction for second homes.


Steven Donald Headshot
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Phone: 252-489-0982
Dated: December 21st 2017
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About Steven: Steve Donald and At The Beach Realty //// At the Beach Realty is a local firm located in Kitty ...

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