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April 2018 Planning ahead for your 2018 taxes: Federal tax updates for homeowners

Even though the recently-signed Tax Cuts and Jobs Act may affect how you file your federal taxes, you have plenty of time to think about your options. This is because most changes took effect in January, and won’t affect your federal tax outlook until you start preparing your taxes next year. But since the deadline to file your 2017 taxes is April 17th, 2018, it's a good time to review changes in the new law, while you're already thinking about your taxes.

Even if your mortgage interest deduction doesn’t change, many of us will see changes in how we calculate gross taxable income, the exemptions we can take, and deductions we can use. (Since we’re not tax experts, we recommend that you consult a tax professional or CPA with questions.)

Tax Act changes that may affect you.

If you bought a home after December 15, 2017, your mortgage interest deduction has been lowered by $250,000, so your maximum will be $750,000. However, if you took out your home loan before December 15, the previous $1 million limit will still apply. Interest deductions for second homes are still deductible, and subject to the same $750,000 limit if purchased after December 15, 2017.

If you currently have a home equity loan, home equity line of credit (HELOC) or second mortgage, you may have heard that these products no longer provide interest deductions. However, this is not 100% accurate. For example, if you recently took out a HELOC to finance home improvements, you may still be eligible to deduct the interest paid. But if you used HELOC funds to pay off higher-interest credit cards, you may not be able to deduct interest paid. More details are available online. Read a February 2018 IRS new release here.

Deductions on state and local property taxes will be limited. You’ll be allowed to itemize deductions of up to $10,000 for your combined state and property taxes. Previously, this deduction had no limit.

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This article originally appeared in Caliber Living, Winter 2018. Want more tips like this one? Ask your loan consultant about subscribing.

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