how tax laws impact real estate

How The New Tax Law Will Impact Your Home

Are you wondering how the new tax laws will impact your home? I interview Bob Ingle, my accountant, about this important topic:

Ruth:  Hi, it’s Ruth again and I’m here with Bob Ingle at Ingle and Associates in Wellesley and we are talking about the changes in the tax code and how it’s effecting homeowners here in the greater Boston area especially. So, Bob, explain how the interest deduction is now changing with the new tax code.

Bob Ingle: Hi, Ruth. Thank you for having me on. Excuse me. As we all know, buying a home is a wonderful asset to purchase and the government helps out a bit by making the mortgage interest on the home deductible. The biggest change to the mortgage interest is on larger homes. When you have a mortgage of more than $750,000, which is fairly large in this day and age even in Massachusetts, the interest you pay on the mortgage in excess of $750,000 is not deductible, which curtails what deduction you can take and the tax savings that you have.

Ruth:  So, essentially what we’re saying is that the very high end homes and buyers who need to mortgage, to get a mortgage for those homes are going to be … Not being able to benefit as much from those deductions and their taxes essentially are going to go up.

Bob Ingle:  That is correct. That is on only new mortgages.

Ruth: Only new mortgages. So everything, any mortgage taken up to now is not going to be effected by this law.

Bob Ingle:  That’s right. The current limit is $1.1 million dollars of mortgage interest is deductible.

Ruth:  How is the state and local tax deduction going to change, Bob?

Bob Ingle:  All right. There is a change in this tax law. But let me first go back a step and saying that it’s always great to be a homeowner. The government likes you to be homeowners so they give you certain deductions that you don’t normally have beyond the standard deduction. In the past, you could only deduct taxes and real estate taxes paid if you itemize your taxes on your return.  They are now limiting the combination of real estate and state income tax deductions to $10,000 per return. That is a significant change in the tax law. People in the higher towns easily pay excess of $10,000 in taxes.

Ruth:   Yup.

Bob Ingle:   And then income tax on top of that. So, even though your tax rates might be going down, your taxable income is going up.

Ruth:   So, the places most effected by it are people with … Those who are most effected are those who are already paying high income taxes at the state level.

Bob Ingle:  Right.

Ruth:  And those who are living in towns such as Weston or Newton or areas where the real estate tax is very high.

Bob Ingle:   That’s correct.

Ruth:  So, it’s the combination of the local tax plus the state tax together, in excess of $10,000 is not going to be deductible.

Bob Ingle:  That is correct. That’s going to effect most of my clients. So, planning is very important going forward.

Ruth:  All right. Is there any way to mitigate this a little bit?

Bob Ingle:  A lot of my clients are paying the first quarter real estate for 2018 now, before the end of the year. But, no, there’s not much …

Ruth:   But by the time this comes out, it’s going to be too late.

Bob Ingle:  Right. So, we’ll stop here. We’re done.

Ruth:  We’re done. There’s no way to mitigate. They’re taking our money.

Bob Ingle:  Big Brother is watching us.

Ruth:  Take it up with the GOP. If you have any other questions about the tax code, you can call me but I’m going to ask you to call Bob instead. We are going to give all the contact information for Ingle and Associates and they can answer all of your questions about how specifically you are going to be effected by the new tax code. Thank you so much. You know where to find me. Call, text, write a comment below. We love hearing from you.