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April 09
Tax Incentives for Homeowners

By Chad Zagar, GreenStone Vice President, Managing Director Tax and Accounting

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The recent passage of the Tax Cuts and Jobs Act (TCJA) is influencing some of the advantages homeowners historically received at tax time. The following addresses some of the most important changes you will see in 2018 from a tax perspective. ​

Limits on deductions for state and local taxes including real property taxes

Previously, individuals could claim an itemized deduction for an unlimited amount of personal (non-business) state and local income and property taxes on their Schedule A of Form 1040. Individuals also had the option of deducting personal state and local general sales taxes on Schedule A instead of state and local income taxes, if that option was more beneficial. 

The TCJA, effective 2018-2025, limits the itemized deductions for personal state and local income taxes and property taxes to a combined total of $10,000 ($5,000 if you use married filing separate status). Additionally, personal foreign real property taxes can no longer be deducted at all. 

Itemized versus standard deduction

Claiming state and local property taxes can only be done if you have enough 2018 itemized deductions to exceed your standard deduction. The TCJA almost doubled the standard deductions for 2018 compared to 2017, so fewer individuals will likely be using itemized deductions. The 2018 standard deduction for married joint-filing couples is $24,000 (compared to $12,700 for 2017). The 2018 standard deduction for heads of households is $18,000 (versus $9,350 for 2017). The 2018 standard deduction for singles and those who use married filing separate status is $12,000 (versus $6,350 for 2017).

The TCJA also eliminated the potential to deduct more than $10,000 (or $5,000 if you use married filing separately) for real property taxes unless you own a home that is used partially for business or partially rented out. In these situations, you could deduct property taxes allowable to those business or rental uses on top of the $10,000 limit. 

TCJA Tax Saver

The TCJA does save a valuable break allowing individuals to potentially exclude from federal income tax up to $250,000 of gain from a qualified home sale or $500,000 if you are a married joint-filler. 

The TCJA will affect individuals differently depending on their unique situations. These are just a few items that will impact new homeowners.  In order to make sure that you minimize your tax liabilities, we recommend you visit with your tax preparer or contact one of GreenStone’s tax accountants to see how the new rules may be affecting your filings.

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