The deadline to file taxes is less than a month away, and for some homeowners the new tax code has changed what to expect when filing their taxes. As with all financial matters, it’s recommended that you consult a certified professional.
The new tax code doesn’t automatically mean that your taxes are going up, but there are some significant changes that homeowners should be aware of. The biggest change? Many homeowners who used to write off their property taxes and the interest they pay their mortgage will no longer be able to. The new law caps the mortgage interest you can write off at loan amounts of no more than $750,000. However, if your loan was in place by Dec. 14, 2017, the loan is grandfathered, and the old $1 million maximum amount still applies. Since most people don’t have a mortgage larger than $750,000, they won’t be affected by the cap.
Some other highlights of the new tax code are:
1. Single people may get more tax benefits from buying a house. Evan Liddiard, a CPA and director of federal tax policy for the National Association of REALTORS® says. “Single people can often reach [and potentially exceed] the standard deduction more quickly.”
2. Student loan debt is deductible. Now, up to $2,500 is deductible if you’re repaying, whether you itemize or not.
3. Charitable deductions and some medical expenses remain itemizable. If you’re generous or have had a big year for medical bills, these, added to your mortgage interest, may be enough to bump you over the standard deduction hump and into the write-off zone.
4. If your mortgage is over the $750,000 cap, pay it down faster. Homeowners can add a little to the principal each month, or make a 13th payment each year.
Again, each person’s circumstances are different, so be sure to consult a tax professional to help navigate this new tax territory.