WASHINGTON – Many homeowners, buyers and sellers are left wondering how the tax reform legislation will affect them. Below is a look at what the final version contains and what it means to homeowners, buyers and sellers:
Standard deduction: The new law increases the standard deduction to $12,000 for single filers and $24,000 for joint filers. For many, it no longer makes sense to itemize deductions.Mortgage interest deductions: The new law caps the limit on deductible mortgage debt at $750,000 for loans taken out after Dec. 14. (Loans made before that date can continue to deduct interest on mortgage debt up to $1 million.) State and local property taxes: The new law limits the property tax deduction to $10,000. The bill specifically precludes prepaying 2018 state and local taxes in 2017.Capital gains exclusion: Home sellers can exclude up to $500,000 for joint filers or $250,000 for single filers for capital gains when selling a primary home as long as the homeowner has lived in the residence for two of the past five years.Deduction for casualty losses: The law restricts the deduction to only losses attributable to a presidentially declared disaster.Moving expenses: The law eliminates the deduction except for members of the military.Estate tax: The law doubles the estate tax exemption to $11.2 million.Historic Tax Credit: The HTC has been used to fund renovations in more than 40,000 historic structures since 1981. The law continues to provide a 20 percent credit when the certified historic property is placed into service, but the new law spreads the deduction over five years.Low-Income Housing Tax Credit: The bill retains the 4 percent LIHTC, which funds about a third of all affordable housing construction.