How Tax Reform Has Changed Tax Planning for Homeowners
It's no surprise that the Tax Cuts and Jobs Act (TCJA) has made sweeping changes to the U.S. tax code. In doing so, it's also altered deductions and other tax breaks for individuals, particularly for homeowners. If you own a home or property, the ways in which you usually time your income and deductions may no longer give you a tax advantage.
Here’s how the TCJA could affect your 2018 tax planning.
- Rental income exclusion that excludes individuals who rent out all or a portion of their principal or secondary residence for fewer than 15 days from having to report the rental income.
- Home sale gain exclusion that allows individuals who sell their principal residence to exclude up to $250,000 of gain ($500,000 for married couples filing jointly) if they meet certain requirements.
- Home sale loss deduction that applies to individuals who rent out or use part of their home for their business. If they sell at a loss, the portion of the loss attributable to the space used for business may be deductible.
Be aware of other changes that could impact your 2018 tax planning
While many of the changes ushered in by the TCJA will primarily affect your home-related tax deductions, there are plenty of others that could impact your charitable donations, medical expense deductions, tax-advantaged saving for health care, and even your alternative minimum tax liability. The TCJA has also suspended personal exemptions for 2018-2025 while introducing an increase to the child credit and a new family credit.
If you haven’t already, now is the time to sit down with your tax advisor to determine how the TCJA could impact your tax planning for 2018 and beyond.