From the Public Policy Office: Tax Cuts and Jobs Act

From the Public Policy Office: Tax Cuts and Jobs Act

January 8, 2018

NAR has written a great deal of helpful literature on the Tax  Cuts and Jobs Act (“Tax Act”) specifically for REALTORS®, which information can be found here. Here are some highpoints on the recently passed and signed Tax Act.

 

For real estate, the main themes are as follows:

  1. State and local taxes deduction capped at $10,000.
  2. Mortgage interest deduction reduced from $1 million to $750,000 for mortgage debt incurred after December 14, 2017, applicable to both a primary residence and second home.
    • Home Equity Loans - The deduction for interest on new home equity indebtedness is eliminated, unless proceeds are used to substantially improve the residence.
  3. 1031 Like-kind Exchanges remains for real property that is not held primarily for sale.
  4. Property loss tax breaks now limited to presidentially-declared disaster areas (2018 to 2025).
 

For real estate professionals, some changes that may affect you include:

  1. Individual Rate Changes – While seven brackets remain for individual tax rates, the rates of each are reduced (through 2025).
  2. Standard Deduction – The standard deduction increased to $24,000 for joint filers.
  3. College Athletic Event Seating – It appears the Tax Act disallows deductions for payments to colleges for the right to purchase tickets or seating at an athletic event (i.e., Tide Pride, Tigers Unlimited).
  4. Individual Mandate for Health Care – The Affordable Care Act’s individual mandate provision is eliminated.
  5. Estate and Gift Taxes – Exemptions double from – $5.5 million per person to $11.2 million per person ($22.4 million for married couples) (2018-2025).
    • Gift/Estate Tax Shelter (2010c(3)) – Set at $10 million, and indexed for inflation.
  6. Corporate Changes
    1. Permanent Changes – Unlike many of the changes for individuals, the corporate tax provision changes are permanent.
    2. Corporate Tax Rate Reduction - The tax rate for corporations will decrease from 35% to 21%.
    3. Limits for Expensing under Section 179 Increased
  7. Dependents
    1. The Child Tax Credit increased to $2,000, and phase out of the credit now begins at $400,000 for joint filers.
    2. Dependent care flexible spending accounts remain in place.
    3. 529 Savings Accounts now cover K-12 tuition at private and religious schools.

*For personal or professional tax advice, please consult with a licensed tax professional.