Below are several of the last minute inclusions in the tax reform bill important to the real estate industry.
· Capital gains exclusion. In a huge win for current and prospective homeowners, current law is left in place on the capital gains exclusion of $250,000 for an individual and $500,000 for married couples on the sale of a home. Both the House and the Senate had sought to make it much harder to qualify for the exclusion.
· Mortgage interest deduction. The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit. The House bill sought a reduction to $500,000. This also applies to second homes.
· State and local tax deductions. Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000. Both the House and Senate bills sought to eliminate the state and local income tax deduction altogether.
· Pass-through entities. The bill significantly reduces the effective rate of tax on business income earned by independent contractors and income received from pass-through entities. This change will lower the taxes of many real estate professionals.
Source: The National Association of REALTORS® (NAR)