Home ownership is a key element of the American dream for many, and the U.S. tax code includes many tax breaks that help support this dream. But under the Tax Cuts and Jobs Act, your home-related breaks may not be as valuable when you file your 2018 return next year.
Property tax deduction.
In 2018, your total deduction for all state and local taxes, including both property taxes and either income taxes or sales taxes, is capped at $10,000.
Mortgage interest deduction.
In 2018, if the mortgage debt was incurred on or after December 15, 2017, the debt limit generally is $750,000.
Home equity debt interest deduction.
In 2018, the TCJA suspends the home equity interest deduction. But the IRS has clarified that such interest generally still will be deductible if used for home improvements.
Mortgage insurance premium deduction.
This break expired December 31, 2017, but Congress might extend it.
Home office deduction.
The self-employed can deduct home office expenses from self-employment income. For 2018, miscellaneous itemized deductions subject to the 2% floor are suspended, so only the self-employed can deduct home office expenses.
Home sale gain exclusion.
When you sell your principal residence, you can exclude up to $250,000 ($500,000 for married couples filing jointly) of gain if you meet certain tests. Changes to this break had been proposed, but they weren’t included in the final TCJA that was signed into law.
Debt forgiveness exclusion.
This break for homeowners who received debt forgiveness in a foreclosure, short sale or mortgage workout for a principal residence expired December 31, 2017, but Congress might extend it.
Additional rules and limits apply to these breaks. To learn more, contact us. We can help you determine which home-related breaks you’re eligible to claim and how your 2018 tax situation may be affected by the TCJA.