5 Things All Homeowners Need to Know About Their 2018 Taxes
Ah, the perks of owning real estate: There’s a whole separate set of tax laws that apply only to you. With tax reform taking effect for 2018, we called in Lynn Ebel, director of the Tax Institute at H&R Block, to help us understand the biggest changes.
There’s a New Cap on Property Tax Deductions
For 2018, the biggest change for homeowners under tax reform is the itemized deductions some homeowners can claim. You can deduct a maximum of $10,000 ($5,000 if married filing separately) in personal property taxes, real estate taxes, plus income and sales taxes combined. In the past, these taxes have generally all been fully tax-deductible (no cap). This means that a homeowner with property taxes over $10,000 will not be able to deduct the full amount.
And a Cap on Home Mortgage Interest Deductions
It used to be that you could deduct the amount of loan interest up to $1 million dollars. (Anyone that was a homeowner prior to December 15, 2017, is grandfathered into that cap.) But for anyone who purchased a home after that date, the new limit on the home mortgage interest deduction is $750,000 in acquisition debt.
You Can No Longer Write Off the Interest on Home Equity Loans
Say you took out a home equity loan after the sale to help offset the costs of buying, building or substantially improving your new place. The new tax laws no longer allow you to write off the interest on these loans—making them less advantageous to take out if you can pay in cash.
Same Goes for Unreimbursed Disaster Losses
Unless your home is located in a federally declared disaster area, you can no longer deduct the amount of any losses you endured during the year. (This also goes for casualty and theft losses.) The only exception is if you conduct business out of your home. In that case, disaster, casualty and theft-related expenses are still a deduction you can take.
Rental Expenses on a Secondary Home Are Still Tax Deductible
Airbnbing your beach house? Unlike your primary residence (for which you do not have to claim rental income), if you rent out your second home for more than two weeks a year, you have to report it on your return. However, you can get tax breaks in the form of maintenance costs related to rental expenses: meaning stuff like supplies, repairs and furniture.