What Happens to Your Mortgage Tax Deduction in 2018

What Happens to Your Mortgage Tax Deduction in 2018

 

What Happens to Your Mortgage Tax Deduction in 2018

What Happens to Your Mortgage Tax Deduction in 2018

A well-known aspect of the new Tax Cuts and Jobs Act is the doubling of the size of the standard deduction. However, this gift came at the expense of several of the most popular itemized deductions. One such being the Mortgage Tax Deduction.

The good news for people with existing mortgages prior to the end of 2017, is that they were grandfathered under the old rules, under which an individual can deduct interest on mortgages over a million dollars. They can also use a special rule for home equity loans where an individual can deduct interest on them up to $1.1 million. However, for new loans that overall limit for the first and second homes are limited to $750,000.

Previously, you could just reduce the amount of withholding that you would have from your paycheck because you would be using the amount to pay for the mortgage interest on your house. It wouldn’t be a big deal since the interest and property tax was deductible. However now that this will be reduced, people getting new mortgages will need to evaluate whether or not they should be reducing their work withholdings.

Another thing to consider is if you have a reason to take on debt and get a home equity loan. Previously this was a good way to self-fund businesses and like ventures; however now, you have to seriously examine the pros and cons of this form of debt since the interest may not be deductible.

There is some discussion as to whether if an individual has a home equity loan and uses it to improve their home, if the interest from that loan can still be deducted. However, only time will tell as the IRS is still interpreting what the law says on that. If the deduction is ruled to work in this situation, the deduction can be used up to $750,000.

For a vast majority of Americans these mortgage tax changes will not be that consequential since most will not be taking out a mortgage to purchase a million-dollar home, and not many will even reach the $750,000 threshold.

But for those that live in California and New York, where property values are exceptionally high, it will be especially frustrating since they would be more likely to be purchasing a home that is worth a million dollar or more depending on the area and these individuals would most likely be itemizing their returns..

It is worth noting that while the usage of this itemized deduction may be reduced, the usage of itemized deductions in general may decrease since the standard deduction for both single and married filing jointly taxpayers has been doubled (from $6,000-$12,000 and $12,000 to $24,000). This means that it will now be in the best interest of a majority of Americans to use the standard deduction.

For any other questions or concerns that you may have about the Tax Cuts and Jobs Act and how it will affect your tax bill, please contact us at GROCO today!

We hope you found this article about “What Happens to Your Mortgage Tax Deduction in 2018” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

To receive our free newsletter, contact us here.

Subscribe our YouTube Channel for more updates.

Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

 

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

American-Dreams-Show-Accounting-firm-in-ca-cpa-tax-advisors-groco-alan-olsen

The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business. Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most. They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

Untitled_Artwork copy 4

MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  It’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges. Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

Posted in
Strategies for Representing Yourself in an IRS Audit

Strategies for Representing Yourself in an IRS Audit

Strategies for Representing Yourself in an IRS Audit Have you been selected by the IRS for an audit? It’s OK. Relax; you can get through this. Although we advise you to never try to go through an audit by yourself, if you really like a challenge and would rather do it by yourself, there are…

Strategies for Representing Yourself in an IRS Audit

U.S. Government Could Lose Billions Due to Fewer Audits

U.S. Government Could Lose Billions Due to Fewer Audits Taxpayers rejoice! There may actually be some good news about tax returns this year. The US Government could lose billions due to fewer audits.  That’s because according to reports, due to  reduced staff, the IRS may be forced to reduce the number of audits it would…