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A fresh new year is once again upon us.... We thought about sending a clever article on how to give your home better curb appeal, but opted to address the elephant in the room instead. How does the new tax law affect Homeowners in 2018?  Among other things, the tax law changes whether and how homeowners deduct mortgage interest and property taxes.

Here are five elements of the tax law that could affect home selling and moving.

1. Mortgage interest deduction: The mortgage interest tax deduction cuts the federal income tax that qualifying homeowners pay by reducing their taxable income by the amount of mortgage interest they pay. Beginning in 2018, the deduction is scaled back to interest on debt up to $750,000, instead of $1 million, for people who buy homes on or after Dec. 15, 2017.  (The law carves out an exception for people who were under contract to buy a home before Dec. 15, 2017, as long as they were scheduled to close by Jan. 1, 2018).    Another exception: When you refinance a mortgage, the compromise bill treats the new loan as if it were originated on the old loan’s date. That means the old limit of $1 million would apply.                                                        

2. Property tax deduction: The former tax law eased the pain of paying property taxes by allowing qualifying taxpayers to reduce their taxable income by the total amount of property taxes they paid. Beginning in  2018, the deduction is limited to a total of $10,000 for the cost of property taxes,  state and local income taxes or sales taxes.                                                                                                                                                                                

3. Home equity deduction: On top of the mortgage interest deduction, the former tax law added a deduction for interest paid on home equity debt “for reasons other than to buy, build, or substantially improve your home.” So, for example, if you borrowed from a home equity line of credit to pay tuition, the interest you paid was tax-deductible. Starting in 2018, the deduction is eliminated for interest paid on home equity debt.                                                                                                                                        

4. Mortgage interest deduction for second homes: You may deduct interest on mortgage debt on your primary home and a second home. The new law keeps this part of the former tax law in place, although it reduces the amount of eligible mortgage debt, as seen in item No. 1 above.                                                                                                 

5. Moving expenses: Under the former tax law, you could deduct some moving expenses when you moved for a new job. You had to meet complex criteria involving distance and timing of the move. Beginning in 2018, only active-duty members of the armed forces will be allowed to deduct moving expenses.                                                  

Capital gain rule unchanged: Homeowners who sell their house for a gain will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains, so long as they’re selling their primary home and have lived there for two of the past five years.


          Your best move? Consider the overall. Homeownership can provide your family with an opportunity to build long-term financial security and independence. Exactly how the new tax law affects you depends on a complex array of factors.... We have only addressed the changes that affect homeownership and mortgages. There are no perfect answers to any financial question, There’s just an ever-changing continuum of potential risk and reward that must be navigated as thoughtfully as possible. A good financial adviser will help you ask the right questions before buying or selling your home.  

           To put an end to something old, we have to start a thing new, The amazing thing with chances is how we get them every year. So, set positive goals and resolutions. Hang them where you can see them every hour of the new year. And be excited for what you can achieve this 2018!


Best Wishes!

Kathy & Marlene

Kathy Fontana & Marlene Arimura-Mortimer
Residential Sales. Leasing. Property Management
(805) 479-0343 (805) 890-4414
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