How the New Tax Act Affects Home Owners and Real Estate Investors

The new tax laws will affect many people personally, in business and in regard to some deductions concerning real estate. Formerly all taxes, whether paid on real estate, personal propertyincome or sale tax were deductible. Effective January 2010 there is a cap of $10000 of tax deductions on real estate, personal property, and either income or sales tax.

There is also a change to home mortgage interest deductions.  As of January 2018, the new act allows interest on $750,000 of acquisition debt on primary and secondary homes. One exception is that the new act continues to allow interest on up to $1 million of acquisition debt for loans prior to December 15, 2017. The new act entirely repeals the deduction for home equity debt.

In the past there has been a deduction for moving expenses for a job related move under certain conditions. Unfortunately, that deduction is suspended, except for a military change of station. Additionally if someone is reimbursed by their employer for moving expenses, that would be included as taxable wages.

For real estate investors who have used a 1031 Exchange, there is also a change. For exchanges completed after December 31, 2017, only real property will qualify for Section 1031 treatment.

There are also some nuances under the Section 179 expenses part of the tax return, which holds some real property deduction (generally lease hold improvement). Under this section a taxpayer may elect to expense certain items including qualified real property. In this section for property placed in service after 2017 the annual expensing and spending cap are increased. There are also some expanded definitions of what is deductible and what is defined as "real property." This section is somewhat complicated and it is advised that individuals who previously had Section 179 expensing speak with their tax advisor on the changes to this under the new act.

If you have questions, let us know at PropertyUp and we can discuss it.