Spring is here! Which means Uncle Sam is waking from his long sleep like a grumpy bear, hungry for your tax dollars. And with recent changes to the tax code, a lot of families are finding he’s hungrier than usual.
I’ve been watching closely how these changes affect homeowners, but even I haven’t fully wrapped my head around all the new rules and guidelines for deductions, exemptions, withholdings, and so on.
I predict a landmark year for tax professionals. As a homeowner, your ideal time to consult an accountant is of course right back when the tax code took effect in January 2018. The next best time is as soon as possible. Why? Here’s a brief rundown of some changes that can really come back to bite you.
If you’re used to deducting your mortgage interest and bought your home on December 15 or later, surprise! The deduction debt cap has dropped from $1 million to $750,000 (or half of each amount for individuals married-filing-separately).
Have you been deducting your property taxes? Surprise! Now that’s capped at $10,000 (or half for married-filing-separately).
Remember that home equity debt interest you used to deduct? Surprise! Now you don’t.
Were you planning to deduct your moving expenses? Unless you’re active-duty military, you guessed it. Surprise.
And these homeowner tax changes are just the tip of the iceberg — scads of other surprises await even the most seasoned self-filer.
Luckily, real estate is still one of the best ways to protect your assets. If you’ve been hoping to buy your first house or move up to your next, this year still looks pretty good. Consult with a REALTOR to discuss ways your money can work for you without incurring a tax liability. Think ahead, and plan your home sale and purchase properly to defer capital gains taxes with a 1031 exchange. Or look into scoring some (mostly) passive income with an investment in commercial property.
I’d love to help you start or continue your real estate journey, and can recommend a good accountant and other professionals to help you preserve and enhance your equity. Don’t let the bear get more than his share. Give me a call anytime!