For decades, tax incentives helped promote the dream of homeownership. The path to owning a home typically came with a great deal of tax benefits, incentivizing families and individuals to make the leap from renters to owners. But passing the Tax Cuts and Jobs Act (TCJA) in late 2017 created a sweeping overhaul of the U.S. tax code and left many homeowners wondering, how does this affect me? Scroll down to see how the new tax law could affect you.
The standard deduction for both single individuals and married couples nearly doubles under the new tax law. Single homeowners now have a $12,000 standard deduction and joint-filing couples’ threshold is now $24,000.
Homeowners could previously take an unlimited deduction for their state and local taxes (SALT), including property taxes. The new tax law caps the SALT deduction at $10,000 for both single and joint-filing couples.
Under the new tax law, single homeowners will generally find it easier to get tax incentives for owning a home than married homeowners. This disadvantage is a byproduct from new changes to the law, especially the increase in the standard deduction for both single and married of homeowners.
The tax code is complex. But that doesn’t mean it should be difficult to understand how the new changes will affect you or your family. Choose an individual or family below that most closely matches your situation and find out what to expect when filing taxes in 2019.
The Allens are middle-class homeowners who live with their two kids in a single-family home. The Allens may receive an overall lower tax liability, but when it comes to owning their home, there won’t be much of a tax advantage from the new tax law.
Nisha Clark is a young, single homeowner who purchased her first home a few years ago. She will get some tax benefits from owning a home, but the new changes will likely cut her tax liability in half.
Samuel Bryant and Margaret Jones are unmarried partners but live together in a newly purchased condo. Their situation means they will each file their own tax returns as singles. The changes to the standard deduction limit make it more beneficial tax-wise for Samuel and Margaret to file as singles and reap more tax benefits from their homeownership.
The Peters are baby boomers who have owned their family home since 1996. Since they are close to paying off their mortgage, they have not been receiving as many tax benefits as newer homeowners. Their tax bill in 2019 won’t look much different under prior law.
Matthew Garcia is a millennial renter living in a fast-paced city. He wants to become a homeowner in the near future to make a big step in his future and build wealth. However, the tax incentives for owning a home that he could have received under the prior law are largely erased by the new tax law.