Julie Molloy's Blog
Thinking of cashing in on income-tax savings now that you're a homeowner? With new tax laws in place for tax-year 2018, new homeowners might not receive what they expect. The Tax Cuts and Jobs Act (TCJA) that went into effect for tax years 2018 through 2025 changed up some of the write-offs homeowners typically expect.
Homes purchased after January 1, 2018, through December 31, 2025 qualify for an itemized deduction for interest on a mortgage up to $750,000 used to improve or acquire a new home that you live in, or $375,000 each if your file married but separate. That is lower than the previous law that allowed for $1 million and $500,000 respectively. Additionally, you used to be able to deduct interest on home-equity debt up to $100,000 ($50,000 each if married filing separate) that no longer is deductible at all.
Limits for deductions for state and local taxes are just $10,000 combined or $5,000 separate. If you live in a high-property-tax state, you’ll likely see a change in your refund due to this change.
A significant difference you'll see, to nearly everyone's advantage, it the increase in the standard deduction. A standard deduction does not require any "deductions" to claim it other than that you exist as a potential tax-payer. These new amounts are $24,400 for married filing joint couples and $18,350 for heads of household. If you file separately or as a single, your deduction is $12,400 just for being you.
This means though that if you relied on itemized deductions to decrease your taxes due, they won't count unless they are in excess of your higher standard deduction. The rest does not actually provide an income tax reduction benefit. So careful itemization (interest, property taxes, gifts to charity) to push you over that $24,400 threshold is where you’ll see some benefit.
When calculating your write-offs, be aware that the percent reduction is only for the amount you make above the $24,400 (or $12,400 for singles), not for your entire income. So if you’re deductions amount to $36,000 and you’re in the 24-percent bracket, your increase bottom line is only 24% of $11,600, ($36,000 minus $24,400) or $2784, not $8,640.
While homeownership still is a great deal for many buyers, the tax deductions for smaller mortgages may not add up to what long-time homeowners may still believe. If you have questions about how your home purchase impacts your taxes, talk to your real estate professional.
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Ready to purchase your dream home? Before you finalize a home purchase, it may be worthwhile to schedule a home appraisal.
With a home appraisal, a property expert will examine a residence both inside and out. The home appraiser then will offer a property valuation.
In some instances, a home offer may be appraisal-contingent. And if the home appraisal valuation falls below the amount of a buyer's offer, the buyer may request a renegotiated price.
A home appraisal may prove to be an important part of the homebuying process. As such, it is paramount for homebuyers to understand what an appraisal is all about and determine whether to conduct an appraisal.
To better understand home appraisals, let's take a look at three home appraisal facts that every homebuyer needs to consider.
1. An appraiser's valuation is his or her opinion of what a residence is worth.
Typically, a home appraiser will use a broad assortment of housing market data as part of a home assessment. The appraiser also will look closely at a residence as part of the home evaluation process.
Although a home appraisal is based on housing market data and a home assessment, it is essential to note that a home valuation is an appraiser's opinion. Therefore, two home appraisers may examine the same housing market data and the same house and come up with two different home valuations.
2. The homes in a neighborhood may affect the valuation of a residence.
Believe it or not, a home's value may be impacted by those around it. Thus, if you intend to buy a home, it often pays to evaluate the neighborhood to better understand whether a house's value will decline, stay the same or increase over time.
Furthermore, what you spend to improve a house is unlikely to raise a house's value proportionately. And if you spend $20,000 on home improvements, there are no guarantees that these home improvements will add $20,000 to a home's valuation.
3. A home appraisal and a home inspection are two very different things.
A home inspection often is considered a must-have during the homebuying process, and perhaps it is easy to understand why.
During a home inspection, a property expert will ensure there are no structural issues with a home and identify any problem areas. Then, a homebuyer can move forward with a home purchase, rescind a home offer or submit a counter proposal based on a home inspection report.
On the other hand, a home appraisal enables a property expert to evaluate the house in its current state. A home appraiser will compare and contrast a home in relation to others in the area and offer a valuation.
If you need help determining whether to conduct a home appraisal, a real estate agent is happy to assist you. With a real estate agent at your side, you can determine whether to set up a home appraisal prior to finalizing a home purchase.