The President signed into law the “Tax Cuts and Jobs Act” on December 22, 2017. All individual provisions of the measure are generally effective after December 31, 2017 for the 2018 tax filing year and expire on December 31, 2025 unless otherwise noted. The provisions do not affect tax filings for 2017 unless noted.
To read NAR’s analysis of the bill’s provisions impacting real estate, please go to “The Tax Cuts and Jobs Act – What it Means for Homeowners and Real Estate Professionals.”
NAR believes the final tax reform bill is significantly better for homeowners than previous versions. REALTORS® generated over 300,000 emails and telephone calls to members of Congress over two Calls for Action and held countless in-person meetings with legislators, all of which helped shape the final product.
Changes to the bill include the following improvements:
- Capital gains exclusion. In a huge win for current and prospective homeowners, current law is left in place on the capital gains exclusion of $250,000 for an individual and $500,000 for married couples on the sale of a home. Both the House and the Senate had sought to make it much harder to qualify for the exclusion.
- Mortgage interest deduction. The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit. The House bill sought a reduction to $500,000.
- Second mortgages. The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
- Second homes. Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
- State and local tax deductions. Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000. Both the House and Senate bills sought to eliminate the state and local income tax deduction altogether.
- Pass-through entities. The bill significantly reduces the effective rate of tax on business income earned by independent contractors and income received from pass-through entities. This change will lower the taxes of many real estate professionals.
Next steps
Enactment of the bill does not end NAR’s effort to reduce the negative impact on homeowners. “REALTORS®’ work on tax issues will continue,” says NAR President Elizabeth Mendenhall, “and we look forward to joining members of Congress from both sides of the rotunda on that endeavor.”
Information Courtesy of the National Association of REALTORS®.
Questions: Contact Brenda Morton, Government Affairs and Communications Manager, at (571) 291-9804 or bmorton@dullesarea.com