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How Will the New Tax Laws Impact You and Your Clients?

Nothing says “Happy New Year” like new tax laws. On December 22, 2017, as promised, President Trump signed the “Tax Cuts and Jobs Act,” enacting sweeping changes to our tax laws. All individual provisions of the measure generally become effective after December 31, 2017 for the 2018 tax filing year and expire on December 31, 2025 (unless otherwise noted). The provisions do not affect tax filings for 2017 unless noted.

HAR’s Federal Political Coordinators (FPCs) Vicki Fullerton (Rep. Kevin Brady), John Nichols (Rep. John Culberson), JoAnn Stevens (Rep. Pete Olson), and DeLora Wilkinson (Rep. Ted Poe) and I met with Republican Members of Congress on November 14 and 15 in Washington, D.C. HAR worked alongside TAR and NAR to advocate on behalf of the real estate industry to preserve the existing tax benefits of home ownership and real estate investments as well as to ensure real estate professionals would benefit from proposed tax changes.

Important changes to the tax laws:

Mortgage Interest Deduction (MID)

  • Reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after December 14, 2017.
  • Current loans of up to $1 million are grandfathered and not subject to the new cap. Neither limit is indexed for inflation.
  • Home equity loan interest deduction
  • Repeals the deduction for interest paid on home equity debt through December 31, 2025.
  • Interest remains deductible on home equity loans (or a second mortgage) if the proceeds are used to substantially improve the residence.

State and local property tax deduction

  • Caps the itemized deduction for state and local property taxes and income or sales taxes at $10,000. This limit is not indexed for inflation.
  • The deduction was previously unlimited.

Moving expenses

  • Repeals the moving expenses deduction, except for members of the Armed Forces.

Standard deductions

  • Doubles the standard deductions for individual filers to $12,000 and joint filers to $24,000. This deduction is indexed for inflation.
  • This greatly reduces the value of the itemized MID and property tax deductions as tax incentives for homeownership as more filers are expected to take the standard deduction rather than itemizing.

The key talking points listed above are a summary of a report generated by TAR. For more information on the “Tax Cuts and Jobs Act” and talking points for Texas REALTOR® Leaders, please visit: https://txrealtors.blog/2018/01/04/what-the-tax-reform-law-means-for-you-and-your-clients/.

The National Association of REALTORS®’ more in-depth tax summary is also available for your review: “The Tax Cuts and Jobs Act – What it Means for Homeowners and Real Estate Professionals.” This guide is broken down into special sections for current and prospective homeowners, real estate professionals, and commercial real estate. For more information, contact NAR’s John DiBiase at (202) 383-1037.

Overall, the final bill had some big successes. However, the real estate industry must remain active and engaged to ensure that Congress and the Trump Administration address additional concerns through future legislation and policymaking.  Your HAR governmental affairs staff is here to help you. Please let us know if you need further information to assist you and your clients in understanding the new laws.

Your responses to the NAR Call for Action to write your Members of Congress helped our U. S. Representatives and Senators better understand what changes to the tax laws mean to REALTORS® and the consumers you represent.  To each of you who responded to the Call for Action, thank you!  Your participation made a positive difference in the writing of the new tax laws.

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Dana Kervin

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