25 Jan Property taxes under the new tax plan
Q. With the new tax law, is the limit on state and property tax deductions a combined $10,000? My property tax is $12,000 and I also pay state taxes yearly. Also I was thinking of investing in second home for less than $200,000. My current mortgage is less than $300,000, so would I be able to take mortgage interest on both homes?
— Figuring it out
A. The recently passed tax legislation is a lot for taxpayers to wrap their heads around.
The new limited itemized deduction for state and local income taxes, combined with local real estate taxes, is now a total of $10,000, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.
“Due to this change, you will see a significant reduction in your allowable deduction in this category for 2018,” Gallo said.
As far as mortgage interest deductions, the tax bill also had changes there.
Mortgages in existence prior to Dec. 31, 2017 will be grandfathered, so this gives homeowners the ability to continue to deduct mortgage interest up to a total loan amount of $1 million, Gallo said.
This is a combined indebtedness on both first and second homes, if applicable.
“Any new loans as of Jan. 1, 2018 will be subject to the new limitation on total mortgage debt of $750,000, Gallo said. “Once again, this is a combined limit of both first and second homes.”
Based on the situation you described, you would not lose the mortgage tax deduction because you said the two potential loans will be less than the $750,000 limit now in place, Gallo said.
Also remember there’s one additional feature in the new tax law that now eliminates any tax deduction for interest paid on Home Equity Lines of Credit, or HELOCs, unless the proceeds are used exclusively for home improvements, Gallo said.
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This post was first published in January 2018.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.