Tax season is approaching, and if you own a home, are considering becoming a homeowner, or are considering selling it is important to know of the 2017 tax reform. In this blog post you’ll find information on everything from mortgage interest deduction to capital gains exclusion, and even moving expenses for sellers.

Mortgage Interest Deduction:

The limit on deductible mortgage debt was reduced from $1 million to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.
Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
Interest paid on home equity loans is only deductible if the proceeds are used to substantially improve the residence.
Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.

Deduction for State and Local Taxes (SALT):

If you itemize your tax return, you can claim up to $10,000 total for state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers.
If you prepaid your 2018 state and local income taxes in 2017, you cannot deduct those taxes.

Capital Gains Exclusion:

Remains unchanged at $250,000 for single filers and $500,000 for joint returns if the house was lived in for two of the last five years.

Housing Impact:

California’s median home price is projected to increase 3.2 percent in 2018. Overall, home sales in California are expected to grow in 2018.
The supply of available homes for sale will be slightly impacted, as homeowners may delay trading up/down to their next home.
Overall, the California housing market is expected to see a decline of 0.3 percent in active listings in 2018.

Moving Expenses:

Moving expenses are no longer tax deductible, except for members of the Armed Forces.

Home Price Impact:

California’s median home price is projected to increase 3.2 percent in 2018, which is good news for home sellers.
Properties priced below $500,000 may see an approximate 4 percent increase in price.
Properties valued at $750,000 may see a price increase of 2.4 percent, while properties at the higher end could inch up 1.5 percent.
Properties priced between $1 million and $1.5 million could still see some appreciation overall, but will likely be at a growth rate of less than 1.5 percent.

Home Sales Impact:

Taking into account the impact of tax reform, home sales in California are expected to increase 0.3 percent in 2018.
Demand for homes priced $600,000 and below will remain strong, due to limited housing inventory.
Homes priced $750,000 - $1 million could experience a decline in sales of up to 0.9 percent.

Housing Supply Impact:

The supply of available homes for sale also will be slightly impacted, as homeowners may delay trading up/down to their next home.
Overall, the California housing market is expected to see a decline of 0.3 percent in active listings in 2018.

*Disclaimer: This is not intended to provide legal or tax advice. Application of provisions to particular tax situations need to be discussed with an accountant, CPA, or tax attorney.

Source: California Association of Realtors

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Real Estate Tips: What Homeowners and Sellers Should Know About Tax Reform