News & Press: The Road Home Newsletter

What You Need to Know About the New Tax Law

Friday, March 22, 2019  
Share |

    March 22, 2019

    What You Need to Know About the New Tax Law

    Well, it is that time of year again -- tax time.  This is often a stressful time for some of us and may be especially so this year as it is the first time that most of us are realizing the full effect of the Tax Cut and Jobs Act, Pub. L., 115-97, passed in December 2017.  

    As homeowners, there are four provisions that have the most impact: (1) the State and Local Tax Deduction; (2) the Mortgage Interest Deduction; (3) the Mortgage Insurance Deduction; and (4) the effects of the new tax deduction tables that impact how much is being withheld (and either how much of a refund you will be due -- or how much you may owe).

    First, homeowners may have run into the $10,000 cap on the deductibility of state and local taxes (both income and property). This is particularly relevant for homeowners in high tax areas. Last year, the $10,000 cap was not in place and today if your income taxes or property taxes are high, this cap may limit this deduction.

    Second, the mortgage interest deduction ceiling was slightly reduced. Rather than the interest on the first $1M, the new law limits it to $750,000 on new mortgages obtained after the new law became effective 12/16/17.  If you obtained your mortgage prior to that date, the prior limit still applies.  See more specifics below:

    “Home mortgage interest. You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.”

    Third, mortgage insurance premiums were previously deductible for homeowners earning up to $110,000.  However, the new law to allow you to deduct them for 2018 has not been enacted.  (On average, that is about $1,500 per household with income under $110,000 who previously claimed the mortgage insurance deduction.)  The restoration of this deduction will require another act of Congress, for which we are actively working, but it may or may not be accomplished.

    America’s Homeowner Alliance is working for you to restore that deduction this year. If we're successful, taxpayers will likely get a chance to file an amended return. It is shame that the approximately two million homeowners who would have had the benefit of this deduction this year are not going to be notified of the opportunity if it is, in fact, restored.  We are going to keep you all informed on the progress of restoring this important mortgage insurance deduction as we work on it throughout the year.  

    Fourth, with respect to tax withholding under the new law, a few things happened at once:  the IRS published new withholding tables to reflect the new tax law and your employer probably adjusted your annual withholdings. You may have had marginally more cash coming home in your paycheck thanks to the new law, but some of you actually did not receive a reduction in your tax bracket, so you may have had a shortfall in your withholding as we mentioned above.  Your decision to itemize your deductions may also be a bit trickier this year. With the increase of the standard deduction from $12,700 to $24,000 for married couples, this change means more people may find an advantage in taking the standard deduction rather than selecting individual, itemized deductions for mortgage interest, property taxes and the like.  Single or married couples may need materially higher income to benefit from continued itemization.

    As your 2018 taxes are being prepared, you may want to reset your tax withholding exemptions for 2019 in order to avoid “surprises” next year.

    And last, everyone should check to see if their local government or state offers a “Homestead exemption” that provides a modest exemption on property taxes. This could put a few hundred dollars back in your pocket, especially if you have a disability or are near retirement age.  Our best advice is to ask your tax preparer and arm yourself with information by using your search engine. For example, just Google “Homestead exemption [your home county, state]”.

    While one of the objectives of the new tax law was to simplify the tax filing process, for many of us, it will be anything but simple this year as both tax payers and tax preparers become familiar with the new rules.  Your AHA does not give tax or other financial advice.  If you have questions or to ensure you take full advantage of the new rule for your unique circumstances, please consult with a tax professional.

    Innovative Kitchen Storage Tips

    Make every inch of your kitchen counters and cabinets count through these smart space-saving ideas!

    • Bowen, Chelsea.  “20 Smart Kitchen Storage Ideas”.  Article here
    • Zoellner, Andy.  “27 Incredible Kitchen Storage Tips and Tricks”.  Article here.
    • Architecture Art Design.  “34 Insanely Smart DIY Kitchen Storage Ideas”.  Article here

    Don’t Miss AHA Member Rewards on Tax Tools

    Get the best deal on tax preparation software OR services with cash back offers.  Double cash back rewards change daily – so check for the latest before you buy.  And cash back offers are also available for in-store purchases.  For all of the best offers, go to AHA Member Rewards.