The New Tax Law and What it Means for Northern Property Owners The Tax Cut and Jobs Act passed by Congress during the tail-end of 2017 left northern homeowners asking the question, “should I prepay my 2018 property tax bill?” A valid question since the 2018 tax law initiated new limits on deductions for state
The New Tax Law and What it Means for Northern Property Owners
The Tax Cut and Jobs Act passed by Congress during the tail-end of 2017 left northern homeowners asking the question, “should I prepay my 2018 property tax bill?” A valid question since the 2018 tax law initiated new limits on deductions for state and local taxes.
fUnder the old law, you could claim an itemized deduction for an unlimited amount of personal state and local income and property taxes. With the Tax Cut and Jobs Act, starting in 2018, your deduction is limited to a total of $10,000, and $5,000 if you are married but file separate status.
So, the new tax law left property owners asking whether or not they could pre-pay their state and local taxes that would otherwise be due in early 2018; that way, they would receive a bigger deduction this year. Unfortunately, there is no loophole to this change; at least, according to the law. The law specifically states that you cannot receive any tax-saving benefit by prepaying your state and local income taxes, although it is unclear how the government will be able to enforce this. On the optimistic side, if you prepaid your state and local property taxes before 2017 ended, you can claim a 2017 deduction.
Another hit to the real estate sector – the Tax Cuts and Jobs Act places new limits on home mortgage interest deductions. Effective this year, the maximum amount of mortgage debt you can acquire for a first or second residence for which you claim itemized interest expense deductions has been reduced from $1 million to $750,000 if you are filing single. If you are using married filing separate status for your taxes, the maximum deduction you can claim is from $500,000 to $375,000. As long as you reach the real estate closing process by April 1, 2018, you are exempt from this affecting your property purchase.
According to MarketWatch, “the old-law $1 million/$500,000 limits continue to apply to home acquisition mortgages that were taken out under the old-law rules and are then refinanced after this year (as long as the refinanced loan principal doesn’t exceed the old loan balance at the time of refinancing). Starting next year, the new law also eliminates the old-law rule that allowed interest deductions on up to $100,000 of home-equality loan balances.”
What Does the New Tax Law Mean for the Real Estate Market in Florida?
The new tax laws going into effect this year have been causing a scurry among homeowners in northern states. Since Florida is a major snowbird destination, with many snowbirds owning real estate in Florida, the state could see a surge in those moving from northern states to here, officially and permanently. In the event that you own a home up north and are considering selling to avoid having to pay higher taxes next year (or not being able to deduct as much),TitleZoom is a premier title insurance company in Florida that can work with you or your real estate agent (if you’re using one) to get you the best deal on your real estate closing costs and title insurance (both lenders title insurance policy and owner’s policy). Visit our closing costs calculator to get an instant quote to see how much you can save.