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What You Need to Know About Home Owner Tax Changes

by Melissa Thompson

Tax Day is looming and while it’s a dreaded task for some, doing taxes is something we all must do.  One of the perks of being a homeowner is that it provides the benefit of some tax deductions.  All homeowners should be aware of these tax perks to take advantage of them and maximize their financial savings.  Recently, a government overhaul of U.S. tax laws included changes that affect homeowners.  While these changes will not be in place for the 2017 tax year, it is wise to be prepared for how they will affect your 2018 taxes.

  1. Home Mortgage Interest Deduction

The mortgage interest tax deduction is considered a way to make homeownership more affordable.Qualifying homeowners can reduce their taxable income by the amount of mortgage interest they pay.Currently, you may deduct the interest you pay on mortgage debt up to $1 million ($500,000 if married and filing separately) on your primary home and a second home.Beginning in 2018, for homes purchased December 15, 2017 and after, the numbers change to $750,000 ($375,000 if married and filing separately).There is an exception in the new tax law that allows for a refinanced mortgage loan to be given the old loan’s origination date. This means if the old loan originated prior to December 15, 2017, the old limit of $1 million would apply.

  1. Property Tax Deduction

The tax law through 2017 allowed homeowners to reduce their taxable income by the total amount of property taxes they paid.  Starting next year, the deduction will be limited to a total of $10,000 for the combination of the cost of property taxes, state and local income taxes or sales taxes.

  1. Home Equity Deduction

Up through your 2017 tax return, the tax law allowed for an added deduction for interest paid on home equity debt “for reasons other than to buy, build, or substantially improve your home.”  In other words, if you took out a home equity line of credit to do something like pay tuition, the interest you paid on that line of credit was tax-deductible.  Starting next year, this deduction will be eliminated.

  1. Tax Breaks for Owning a Second Home

As stated above, you may deduct interest on mortgage debt on both your primary home and a second home.  The new law changes this a bit for 2018.  It reduces the amount of eligible mortgage debt from $1 million to $750,000.

  1. Moving Expenses

While it was a complicated process that involved criteria such as distance and timing of a move, up through this year the tax law allowed you to deduct some moving expenses if you moved for a new job.  Starting in 2018, only active-duty members of the armed forces will be allowed to deduct moving expenses.

If you find the tax laws confusing, you are not alone. It is smart to ask a reputable accountant any questions you may have so that you can maximize the tax perks of being a homeowner!

http://www.yourkeytomemphis.com/Blog/Free-Yourself-from-Debt-and-Become-a-Homeowner

http://www.yourkeytomemphis.com/Blog/Debunking-Real-Estate-Myths

http://www.yourkeytomemphis.com/Blog/The-Top-Ten-Reasons-Hiring-a-Realtor-is-the-Smart-Thing-to-Do

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Four Reasons to Buy a Home Now!

by Melissa Thompson

You may be wondering if this is the best time to buy a home.  Spring is a busy time in general for real estate transactions and right now it’s a seller's market, meaning supply is low and demand is high. But the truth is, there are always excellent reasons to buy a house, regardless of market activity.

First, buying is cheaper than renting. The results of the latest Rent vs. Buy Report from Trulia show that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States. The report reveals that:

“Interest rates have remained low, and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation…Nationally, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.”

Another benefit of homeownership is that it forces you to save money. The financial commitment you make when you buy a home means that your monthly housing cost must be paid, no matter what.  When you take on this responsibility, it may inspire you to be more frugal and to save more.

Tax deductions are also a perk of owning a home. There are many tax advantages, including (but not limited to) reducing your taxable income by deducting interest paid on a home mortgage and deducting property taxes paid.

Finally, experts expect home price appreciation to continue. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts, and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

Over the next five years, home prices are expected to appreciate 3.22% per year on average and to grow by 17.3% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.

The bottom line is that buying a home now will prove to be a sound financial decision for years to come. Don’t wait!  Contact Melissa Thompson at Your Key To Memphis to find your dream home today!

Tax Return Depressing? Owning a Home Could Help

by Melissa Thompson

Tax Return Depressing? Owning a Home Could Help | Keeping Current Matters

Many Americans got some depressing news last week; either their tax return was not as large as they had hoped or, in some cases, they were told they owed additional money to either the Federal or State government or both. One way to save on taxes is to own your own home.

According to the Tax Policy Center’s Briefing Book -“A citizen's guide to the fascinating (though often complex) elements of the federal Tax System” - there are several tax advantages to homeownership.

Here are four items, and a quote on each, from the Briefing Book:

1. Mortgage Interest Deduction

“Homeowners who itemize deductions may reduce their taxable income by deducting any interest paid on a home mortgage. The deduction is limited to interest paid on up to $1 million of debt incurred to purchase or substantially rehabilitate a home. Homeowners also may deduct interest paid on up to $100,000 of home equity debt, regardless of how they use the borrowed funds. Taxpayers who do not own their home have no comparable ability to deduct interest paid on debt incurred to purchase goods and services.”

2. Property Tax Deduction

“Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes.”

3. Imputed Rent

“Buying a home is an investment, part of the returns from which is the opportunity to live in the home rent-free. Unlike returns from other investments, the return on homeownership—what economists call “imputed rent”—is excluded from taxable income. In contrast, landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their simultaneous role as their own landlords.”

4. Profits from Home Sales

“Taxpayers who sell assets must generally pay capital gains tax on any profits made on the sale. But homeowners may exclude from taxable income up to $250,000 ($500,000 for joint filers) of capital gains on the sale of their home if they satisfy certain criteria: they must have maintained the home as their principal residence in two out of the preceding five years, and they generally may not have claimed the capital gains exclusion for the sale of another home during the previous two years.”

Bottom Line

We are not suggesting that you purchase a house just to save on your taxes. However, if you have been on the fence as to whether 2017 is the year you should become a homeowner, this information might help with that decision. Contact The Melissa Thompson Team today to start your home search! 901-729-9526 or Melissa@YourKeytoMemphis.com 

Disclaimer: Always check with your accountant to find out what tax advantages apply to you in your area.  

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Contact Information

Photo of Melissa Thompson Real Estate
Melissa Thompson
Crye-Leike Realtors
6525 N Quail Hollow Road
Memphis TN 38120
(901) 729-9526
(901) 756-8900
Fax: (901) 435-0620