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How The New Tax Law Compares To The Old Tax Law

by Galand Haas

Good Monday Morning!

Over the past couple of weeks I have had numerous questions about the new tax laws. There are some changes and the following information will give you some ideas on what those changes look like.

Under the new tax law, homeowners will have decisions to make in 2018, due to reductions or elimination of certain deductions under the new tax law.

Real Estate: How The New Tax Law Compares to the Old Tax Law  
Measure Old Tax Law New Tax Law
Mortgage Interest Deduction Could deduct interest on up to 
$1 million in mortgages on primary & secondary residences
Can deduct interest on up to 
$750,000 in mortgages on 
primary & secondary residences
State and Local income, sales & Property Taxes  Can be deducted from federal income taxes Caps Federal income tax deduction at no more than $10,000 for total of all local state income, property and sales taxes
Interest on home equity debt (HELOCs) Home equity debt interest 
is deductible up to $100,000 if not disallowed by the AMT
Cannot deduct interest on home equity debt-new or existing on personal residence unless improving the residence* 

Equity debt on the personal residence is deductible if it is used to finance 
or improve a rental property
Capital Gains on Home Sales Can exclude up to $500,000 of gain for joint filers or $250,000 of gain for 
single filers from capital gains when selling a primary home, as long as the homeowner has lived in the 
residence for 2 of the past 5 years
No change
Source: Factcheck.org

$937,500 in purchase mortgages is the Max deduction for Mortgage Interest with 20% down.
The mortgage interest deduction is now limited to mortgages totaling up to $750,000 for primary and secondary homes. This means that homebuyers with a 20% down payment can only deduct 100% of the interest from their mortgages if their purchase price total is less than $937,500. 

 

Property Tax Impacts in High Tax States
State income tax, sales tax and property tax deductions (SALT) are now capped at $10,000 total. This is a significant hit for many high tax state residents in high cost areas. 

 

Tax Plan Calculator: Estimate Your Tax Liability
What does this mean for your bottom line? The Wall Street Journal’s tax plan calculator analyzes the impact of the biggest factors in the bill, so you can estimate your tax liability for 2018 through 2027. Click here for The Wall Street Journal Tax Plan Calculator.
 
Common Scenarios: How the Tax Bill Will Affect 8 Families
Bloomberg shows how taxes owed on wage and pass-through income (from a business you own) will change in 2018. These scenarios may remind you of someone you know: 
  • The multimillionaires in New York
  • The second home scenario in California
  • The small business owners in Pittsburgh
  • The suburban family in Westchester
  • Single in Manhattan
  • Married in Austin – a young couple who rents
  • Median income in Oregon
  • Renting in Milwaukee
 
Tax Workaround for Vacation Homes
Owners and buyers of second homes can potentially turn their vacation homes into an investment property by setting up a limited liability company. That allows them to write off interest and upkeep, while using the property part of the year for themselves, according to The Denver Post. Consult a tax professional for help navigating the new tax rules and how to best structure this business.

 Have An Awesome Week!

THIS WEEK'S HOT HOME LISTING!

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Price: $595,000 Beds: 3 Baths: 2 Sq Ft: 2000
Horse property only 5 mins from town! Nearly 6 level acres, backs up to canal & great for trail riding along Amazon. Wonderfully updated home with 2-car garage. 1 bedroom guest house w/ carport has income producing potential. 2 barns w/ 11 stalls, i...



AND HERE'S YOUR MONDAY MORNING COFFEE!! 

The New U.S. Tax Code and Its Affect On You

by Galand Haas

Good Morning!

There are many questions about the new tax plan currenty beeing looked at by the Senate.  How will it affect all of us?  There is much debate ahead and mostly likely many changes ahead before a bill is passed. The following is an article from "Realtor.com"  that goes over what is currently being discussed.

After months of internal debate among Republicans, the House Ways and Means Committee released the details of its plan to overhaul the U.S. tax code for businesses and individuals. The highlights include lower rates for many individual households but not the highest earners; fewer individual tax brackets; a larger standard deduction for households who don’t itemize their tax bills; trimmed-back deductions for state and local taxes; eventual repeal of the estate tax; and much lower rates for corporate profits and profits for individuals on unincorporated business income. Here is a look at all of the details.

New tax brackets and rates

Tax treatment for the wealthy is among the hottest issues. The House Republican tax plan will preserve a top individual tax rate of 39.6%. Republicans last year had been discussing a top rate of 33%, and then moved to 35% earlier this year.

The retention of the 39.6% individual tax rate marks a shift in the way Republicans think about tax policy. For years, they had focused on driving down that top tax rate. President Trump says he is instead focused on middle-income cuts and large changes to the business tax code, which he argues will boost growth and hiring.

Effect on deductions and credits

The plan aims to increase the standard deduction, while adjusting several other deduction and credits.

House Republicans had planned to release the bill Wednesday but delayed it until Thursday to finish technical work on the legislation and address thorny issues such as how to treat deductions for state and local taxes. Party leaders want to repeal the deduction, but that has sparked a rebellion from lawmakers in high-tax states like New York and New Jersey and set off a scramble for compromise, centered on keeping the deduction for property taxes.

Standard Deduction

• Current law for 2017: $12,700 (married); $9,350 (head of household); $6,350 (single)

• Proposed for 2018: $24,400 (married); $18,300 (head of household); $12,200 (single)

Personal Exemption

• Current law for 2017: $4,050

• Proposed: Repealed Child Tax Credit

• Current law: $1,000

• Proposed: $1,600 plus $300 each for the taxpayer, a spouse and any non-child dependents

State and Local Taxes

• Current law: Itemized deduction

• Proposed: Deduction capped at $10,000 for property tax only

Charitable Donations

• Current law: Itemized deduction

• Proposed: Unchanged

Mortgage Interest Deduction

• Current law: Itemized deduction on loans up to $1 million

• Proposed: Itemized deduction for loans up to $500,000 on new home purchases

Alternative Minimum Tax

• Current law: Parallel tax that disallows personal exemptions and state deductions• Proposed: Repealed

Retirement Accounts

• Current law: 401(k) plans allow pretax deferral of up to $18,000

• Proposed: Minor changes


Have An Awesome Week!

THIS WEEK'S HOT HOME LISTING!

Image Unavailable
927 S. 58th Street
Price: $299,900 Beds: 3 Baths: 2 Sq Ft: 1522
Beautiful brand new home from builder Gary Konold. One level home features CORETec floors, granite counters, vaulted/high ceilings, gas fireplace & Great Room. Dining area w/ slider, kitchen w/ SS appliances, recessed lighting & peninsula with eatin...


AND HERE'S YOUR MONDAY MORNING COFFEE!! 

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Photo of Galand Haas Team  Real Estate
Galand Haas Team
Keller Williams Realty Eugene and Springfield
2644 Suzanne Way
Eugene OR 97408
Direct: (541) 349-2620
Fax: 541-687-6411

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