Realty Executives

Some Tax Tips for New Homeowners

by Susan Christy 03/18/2019

Thinking of cashing in on income-tax savings now that you're a homeowner? With new tax laws in place for tax-year 2018, new homeowners might not receive what they expect. The Tax Cuts and Jobs Act (TCJA) that went into effect for tax years 2018 through 2025 changed up some of the write-offs homeowners typically expect.

Interest

Homes purchased after January 1, 2018, through December 31, 2025 qualify for an itemized deduction for interest on a mortgage up to $750,000 used to improve or acquire a new home that you live in, or $375,000 each if your file married but separate. That is lower than the previous law that allowed for $1 million and $500,000 respectively. Additionally, you used to be able to deduct interest on home-equity debt up to $100,000 ($50,000 each if married filing separate) that no longer is deductible at all. 

Local Taxes

Limits for deductions for state and local taxes are just $10,000 combined or $5,000 separate. If you live in a high-property-tax state, you’ll likely see a change in your refund due to this change.

Standard Deduction

A significant difference you'll see, to nearly everyone's advantage, it the increase in the standard deduction. A standard deduction does not require any "deductions" to claim it other than that you exist as a potential tax-payer. These new amounts are $24,400 for married filing joint couples and $18,350 for heads of household. If you file separately or as a single, your deduction is $12,400 just for being you.

This means though that if you relied on itemized deductions to decrease your taxes due, they won't count unless they are in excess of your higher standard deduction. The rest does not actually provide an income tax reduction benefit. So careful itemization (interest, property taxes, gifts to charity) to push you over that $24,400 threshold is where you’ll see some benefit.

When calculating your write-offs, be aware that the percent reduction is only for the amount you make above the $24,400 (or $12,400 for singles), not for your entire income. So if you’re deductions amount to $36,000 and you’re in the 24-percent bracket, your increase bottom line is only 24% of $11,600, ($36,000 minus $24,400) or $2784, not $8,640. 

While homeownership still is a great deal for many buyers, the tax deductions for smaller mortgages may not add up to what long-time homeowners may still believe. If you have questions about how your home purchase impacts your taxes, talk to your real estate professional.

About the Author
Author

Susan Christy

Hello, and thank you for visiting!

When it comes to real estate experience, few compare to Susan Christy. As a full-time Realtor for over 30 years, Susan has been successfully selling and finding homes for her clients since 1987, and her in-depth knowledge of the real estate process is hard to match. There are few challenges Susan hasn’t experienced and successfully resolved. She has not only the expertise to seamlessly close a real estate transaction, but the personal skills to instill a comfortable confidence, putting her clients at ease. She carefully listens, puts a plan in place, and follows through to the close of escrow and beyond. Susan is the real estate professional with the tact and skill to negotiate the highest return for her sellers and best possible price for her buyers: the true professional you want on your side.  

Susan holds a Bachelor’s degree in Psychology and a Master’s Degree in Education from Arizona State University and taught special education for four years prior to beginning her real estate career in 1987. She was raised in the Arcadia area of East Phoenix, where she has also raised her two daughters. Susan has been affiliated with Realty Executives for over 20 years, among the most highly respected real estate brokerages in Arizona, and has garnered many honors for superior sales performance, including the Phoenix Association of Realtors President’s Roundtable, Realty Executives 100% Club and Executive Club awards and the Realtor.com Online Marketing Award of Excellence. In addition, her superior performance has earned her membership in the Top Agent Network (TAN), as well as the CLHMS (Certified Luxury Home Marketing Specialist) and National Association of Realtors BPOR (Broker Price Opinion Resource) designations. She maintains active membership in the Luxury Home Tour Inc. of Arizona and the Arcadia Camelback Tour.  

Specializing in Phoenix, Arcadia, Scottsdale, and Paradise Valley, but experienced and able to assist with real estate needs in nearly all areas of the Valley, her goal is to provide superior service second to none. Her clients can expect expert representation, communication, and negotiation skills from contract to close, intensive attention to detail throughout all phases of the real estate transaction, and above all, integrity and professionalism. She is: Client Focused. Results Driven. Please feel free to contact Susan at any time to discuss how she can best assist you with your real estate needs.