Here's a breakdown of the proposed tax plan that would affect the Real Estate Market. Officially known as the "Tax Cuts and Jobs Act" Bill which passed the House on 11/16/17 and now sits in the Senate for Approval. Passed by the Yeas and Nays: 227 - 205.
Proposed tax plan rates and income brackets
Tax Rate - Single Filer - Married Filing Jointly Filers
12% Up to $45,000 - Up to $90,000
25% $45,001 to $200,000 - $90,001 to $260,000
35% $200,001 to $500,000 - $260,001 to $1 million
39.6% More than $500,000 - More than $1 million
Standard deduction for married couples to be $24K, currently $12,700. For unmarried individuals $12K, currently $6,530. It would also repeal the alternative minimum tax.
Some of the changes to take place that affect the Real Estate Market:
1. Slash the mortgage interest deduction in half from $1 million to $500,000. 2. Elimination of the deduction for state and local income or sales taxes not paid or accrued in a trade or business,
3. Property tax deduction will be capped at $10,000
4. Requirement for taxpayers to live in a home for five of the past eight years in order to exclude capital gains from the sale of that house. Currently, it’s two of the past five years.
5. The limit on the capital gains exclusion would stay at $500,000 for joint filers and $250,000 for singles but would begin phasing out for taxpayers with incomes above $500,000 for joint filers and $250,000 for single filers. You could use the exclusion only once every five years instead of once every two years.
6. no more deductions for moving expenses
7. no more property and casualty write-offs
4. The proposal will double the estate tax exemption to roughly $11 million, from $5.49 million, meaning families can avoid paying taxes on large inheritance. And it eventually repeals the estate tax altogether, phasing it out entirely in six years
1. Slash the mortgage interest deduction in half from $1 million to $500,000. 2. Elimination of the deduction for state and local income or sales taxes not paid or accrued in a trade or business,
3. Property tax deduction will be capped at $10,000
4. Requirement for taxpayers to live in a home for five of the past eight years in order to exclude capital gains from the sale of that house. Currently, it’s two of the past five years.
5. The limit on the capital gains exclusion would stay at $500,000 for joint filers and $250,000 for singles but would begin phasing out for taxpayers with incomes above $500,000 for joint filers and $250,000 for single filers. You could use the exclusion only once every five years instead of once every two years.
6. no more deductions for moving expenses
7. no more property and casualty write-offs
4. The proposal will double the estate tax exemption to roughly $11 million, from $5.49 million, meaning families can avoid paying taxes on large inheritance. And it eventually repeals the estate tax altogether, phasing it out entirely in six years
Business Changes:
1. a permanent cut to the corporate tax rate to 20% from 35% —
2. Small businesses and sole proprietors will be taxed at 25%
3. allows increased expensing of the costs of certain property
1. a permanent cut to the corporate tax rate to 20% from 35% —
2. Small businesses and sole proprietors will be taxed at 25%
3. allows increased expensing of the costs of certain property
It also plans to expand the child tax credit to $1,600 from $1,000 and add a $300 credit for each parent and non-child dependent, such as older family members, though that credit would expire after five years. Those making less than $24,000 will pay no income tax.
From the Government website:
Summary of the "Tax Cuts and Jobs Act"
This bill amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.
With respect to individuals, the bill:
replaces the seven existing tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) with four brackets (12%, 25%, 35%, and 39.6%),
increases the standard deduction,
repeals the deduction for personal exemptions,
establishes a 25% maximum rate on the business income of individuals,
increases the child tax credit and establishes a new family tax credit,
repeals the overall limitation on certain itemized deductions,
limits the mortgage interest deduction for debt incurred after November 2, 2017, to mortgages of up to $500,000 (currently $1 million),
repeals the deduction for state and local income or sales taxes not paid or accrued in a trade or business,
repeals the deduction for medical expenses,
consolidates and repeals several education-related deductions and credits,
repeals the alternative minimum tax, and
repeals the estate and generation-skipping transfer taxes in six years.
For businesses, the bill:
increases the standard deduction,
repeals the deduction for personal exemptions,
establishes a 25% maximum rate on the business income of individuals,
increases the child tax credit and establishes a new family tax credit,
repeals the overall limitation on certain itemized deductions,
limits the mortgage interest deduction for debt incurred after November 2, 2017, to mortgages of up to $500,000 (currently $1 million),
repeals the deduction for state and local income or sales taxes not paid or accrued in a trade or business,
repeals the deduction for medical expenses,
consolidates and repeals several education-related deductions and credits,
repeals the alternative minimum tax, and
repeals the estate and generation-skipping transfer taxes in six years.
For businesses, the bill:
reduces the corporate tax rate from a maximum of 35% to a flat 20% rate (25% for personal services corporations),
allows increased expensing of the costs of certain property,
limits the deductibility of net interest expenses to 30% of the business's adjusted taxable income,
repeals the work opportunity tax credit,
terminates the exclusion for interest on private activity bonds,
modifies or repeals various energy-related deductions and credits,
modifies the taxation of foreign income, and
imposes an excise tax on certain payments from domestic corporations to related foreign corporations.
The bill also repeals or modifies several additional credits and deductions for individuals and businesses.
allows increased expensing of the costs of certain property,
limits the deductibility of net interest expenses to 30% of the business's adjusted taxable income,
repeals the work opportunity tax credit,
terminates the exclusion for interest on private activity bonds,
modifies or repeals various energy-related deductions and credits,
modifies the taxation of foreign income, and
imposes an excise tax on certain payments from domestic corporations to related foreign corporations.
The bill also repeals or modifies several additional credits and deductions for individuals and businesses.
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