If you own your own home, you may not enjoy the same income tax savings you had prior to the Tax Cuts and Jobs Act (TCJA) of 2017. In the following article, Audit Defense reviews the federal income tax benefits for homeowners after the TCJA. Audit Defense reviews individual and business tax returns, helping filers navigate IRS audits successfully and affordably.
With property values and rent prices skyrocketing throughout the U.S., many people are understandably investigating the benefits of homeownership. Additionally, ownership costs can be mitigated by tax savings if you have the right strategy. However, under the new Tax Cuts and Jobs Act (TCJA) of 2017 might not be as significant as they had been in previous years. Here is a breakdown of the federal income tax perks of owning a home after the implementation of TCJA.
HOME MORTGAGE INTEREST AND PROPERTY TAX DEDUCTIONS REDUCED.
The new law allows itemized deductions up to $750,000 for mortgage debt interest for individuals, and up to $375,000 for married filing separate status for homes purchased between 2018 and 2025. Previously, the limit was $1 million for individuals, and $500,000 for married filing separate. Additionally, there are no more deductions on the interest on home equity debt for loans used for non-home-related purposes.
ITEMIZED DEDUCTIONS MIGHT NOT BENEFIT YOU
Prior to the TCJA, the standard deduction was for joint filers $13,000, making itemizing deductions beneficial, since homeowners could write off their mortgage interest, state and property taxes, and charitable contributions to lower their overall income tax obligation. After the TCJA, the standard deduction nearly doubled. You may no longer benefit from itemizing your deductions if your standard deduction exceeds your itemized deductions.