With the 2018 Tax Reform, there are a few changes that are particularly relevant for homeowners:a reduction in the amount of mortgage interest that can be deducted, and a new cap on property tax deductions.
As the law stood previously, homeowners can claim (as an itemized deduction) interest paid on mortgages valued up to $1 million used to acquire or improve a first and/or second home. The plan maintains the current cap for existing homeowners, but slashes it to $750,000 for homes purchased in the future. (The bill would also limit the mortgage interest deduction to one principal home, ending any deductions for vacation homes.) This means a home buyer paying 4% interest on a $1 million mortgage would be able to deduct just $20,000, as opposed to the current $40,000. At the same time as the plan cuts back on deductions for individual homeowners, it exempts real estate investors from a new 30% limit on interest deductibility for businesses.
In the final plan, people can deduct up to $10,000 (married couples are also limited to just $10,000). The House initially restricted the $10,000 deduction to just property taxes, but the final bill allows any state and local taxes to be deducted, whether for property, income or sales taxes.
*Courtesy of Forbes.com, Contact your tax consultant for more information.