From the Public Policy Office: Tax Cuts and Jobs Act
January 9, 2018
NAR has written a great deal of helpful literature on the Tax Cuts and Jobs Act (“Tax Act”) specifically for REALTORS®, which information can be found here. Here are some highpoints on the recently passed and signed Tax Act.
For real estate, the main themes are as follows:
- State and local taxes deduction capped at $10,000.
- Mortgage interest deduction reduced from $1 million to $750,000 for mortgage debt incurred after December 14, 2017, applicable to both a primary residence and second home.
- Home Equity Loans - The deduction for interest on new home equity indebtedness is eliminated, unless proceeds are used to substantially improve the residence.
- 1031 Like-kind Exchanges remains for real property that is not held primarily for sale.
- Property loss tax breaks now limited to presidentially-declared disaster areas (2018 to 2025).
For real estate professionals, some changes that may affect you include:
- Individual Rate Changes – While seven brackets remain for individual tax rates, the rates of each are reduced (through 2025).
- Standard Deduction – The standard deduction increased to $24,000 for joint filers.
- College Athletic Event Seating – It appears the Tax Act disallows deductions for payments to colleges for the right to purchase tickets or seating at an athletic event (i.e., Tide Pride, Tigers Unlimited).
- Individual Mandate for Health Care – The Affordable Care Act’s individual mandate provision is eliminated.
- Estate and Gift Taxes – Exemptions double from – $5.5 million per person to $11.2 million per person ($22.4 million for married couples) (2018-2025).
- Gift/Estate Tax Shelter (2010c(3)) – Set at $10 million, and indexed for inflation.
- Corporate Changes
- Permanent Changes – Unlike many of the changes for individuals, the corporate tax provision changes are permanent.
- Corporate Tax Rate Reduction - The tax rate for corporations will decrease from 35% to 21%.
- Limits for Expensing under Section 179 Increased
- The Child Tax Credit increased to $2,000, and phase out of the credit now begins at $400,000 for joint filers.
- Dependent care flexible spending accounts remain in place.
- 529 Savings Accounts now cover K-12 tuition at private and religious schools.
*For personal or professional tax advice, please consult with a licensed tax professional.