A new tax plan passed by Congress in December 2017 allows taxpayers to deduct mortgage interest up to $750,000. This is lower than the previous limit of $1 million. The limit only affects new mortgages, not existing mortgages.
Since the median list price of a home is $270,000, most homeowners won’t be affected by the limit decrease. The new limit is expected to affect about 1.3 percent of new mortgages on very expensive homes, usually in expensive housing markets such as coastal areas.
The new limits on deductions aren’t expected to affect many people nationally, according to realtor.com. That’s because homeowners can only take the deduction if they itemize and only about one-third of taxpayers do that. Of those that itemize, just over 21 percent use the deduction. However, it will affect high-cost markets in local areas.
Experts are divided as to the impact of the new tax plan on housing. Some are concerned that the tax changes will encourage people to turn their home into rentals in high-cost areas, which may cause house prices to fall.
On the other hand, a higher standard deduction may enable taxpayers in lower brackets able to buy a home which could push prices up, according to realtor.com.
Article provided by Bluegreen Carpet & Tile Cleaning in Madison