Now that President Trump’s new tax rules have been put into motion, there may be a couple of additional items that you’ll need to put on (or take off) your To-Do list if you are planning to purchase a new home. You may also find that being a home owner might not have all the same tax related benefits that it did prior to 2018.
For example, going forward, certain tax breaks from the past will be less generous – starting with the home mortgage interest deduction being capped at $750,000 for loans that are newly issued. (This deduction was previously capped at mortgages of up to $1 million).
Because of that, owning a home – at least for some – could end up to be a more costly endeavor. So, be sure to keep the following tips in mind:
1) Be sure to keep your housing costs at 30% (or less) of your take-home pay. By sticking to this “rule” – which also encompasses the cost of maintenance – you will likely be in a better position financially, regardless of where your deductions end up.
2) Be mindful of your property tax deduction. Just like the new tax law limits the amount of mortgage interest deduction that you can take, it also limits how much of your property tax may be deducted. Here, the state and local tax deduction will be maxed out at $10,000.
3) Don’t rely on an equity loan for making “deductible” improvements. Because you will no longer be allowed to deduct home equity loan interest, this funding source may no longer be as attractive to tap into if you need to make any renovations and / or updates to you new home.
Are you thinking about moving forward with the purchase of a new home in the future? If so, we can assist you through the entire process, from finding a home that meets your budget in a certain location, to getting your current home ready to price and sell. For more information, give us a call today.