For taxpayers with existing mortgages you can currently deduct mortgage interest of up to 1,000,000 (500,000 married separate) of incurred debt. Under the new Code, mortgages taken out between December 15,2017 and December 31, 2025 are now only eligible for an interest deduction on their mortgage of up to $750,000 ($375,000 married separate). Note: If you have a binding contract signed before December 15, 2017 and close on the home no later than April 1, 2018 the old rules apply to you.
Prior to the new Code, interest on Home Equity loans of up to $100,000 has been fully deductible. The new rules have eliminated this deduction on all HELOC loans, including existing loans already in place.
The impact on home sales is unclear at this point, we anticipate that the potential decline in pricing in urban areas could be offset by the reduction of sellers who keep their homes to avoid the new rules
The tax free sale of primary homes is a great benefit in the current code, married couples can exclude up to $500,000 ($250,000 single) from their income taxes as long as the home is their residence for at least two of the last five years. There was much debate about changing this to five of the last eight years but this was not passed. This benefit remains in place.
Next blog will talk about the impact on itemized deductions overall on your form Schedule A