Home-Buying in the Brave New TCJA World
Title – Home-Buying in the Brave New TCJA World
You could say, in the corniest sense possible, that buying a home is as American as apple pie. As the TCJA was a landmark alteration of the tax code, it should come as no surprise that there are some tax provisions to take into account if you are considering buying a home in the near future:
Mortgage Interest Deduction Cap – While you used to be able to deduct up to $1,000,000 in mortgage expenses on first and second homes, the TCJA has reduced this amount to $750,000.
The End of the Moving Expense Deduction – Before the TCJA, moving expenses for new jobs a reasonable distance away could be deducted from that year’s taxes, the rationale being that this would lower the barriers to relocation and thus facilitate a more dynamic economy. The TCJA has reserved this deduction exclusively for active-duty military personnel.
Changes to Write-offs for Home Equity – The TCJA now limits the deduction of interest derived from home equity loans or home equity lines of credit. While taking out these sorts of loans used to allow for a nice interest deduction in any scenario, now deductions on that interest are allowed only on money used explicitly on home improvement. So if you take out a home equity loan, don’t expect to use the interest on a vacation if you want to take advantage of this deduction.
Limited Property Tax Deduction – The much talked-about SALT deduction also applies to property taxes, so now you cannot claim more than $10,000 in state and local taxes for a deduction. While the larger standard deductions offered on new property are likely to be invoked in place of the SALT, in certain scenarios where a home buyer may want to use the SALT deduction instead, there is now a limit on that deduction.