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The Colony, TX (February 6, 2019) – Homeowners need to be aware that some federal tax deductions or credits have changed under the Tax Cuts and Jobs Act. The changes could affect taxpayers’ liability or tax refund. Liberty Tax looks at four changes that local homeowners may need to consider.
State and local income tax deduction. The new tax law sets a limit of up to $10,000 ($5,000 for a married taxpayer filing a separate return) for an itemized deduction for state and local property taxes, income taxes and general taxes paid or accrued in the tax year.
Home mortgage interest. The itemized deduction for home mortgage interest for home buyers in tax years 2018 to 2025 is subject to limitations. Those homeowners may deduct interest paid on up to $750,000 ($375,000 if married filing separately) of home acquisition debt. Homeowners whose homes were purchased before December 16, 2017, are not affected by this change.
Home equity loans. Taxpayers may deduct interest paid on home equity loans only if the loans are used for the purchase of, building of or substantial improvement of the taxpayer’s home that secures the loan. The deduction is subject to limitations.
Personal casualty and theft losses. The Tax Cuts and Jobs Act changed the rules on the itemized deduction for personal casualty and theft losses. Now taxpayers can claim only those losses attributable to a federally declared disaster.