Home values could decline, thanks to tax changes

When it comes to real estate, legal experts suggest that the massive tax overhaul could have some unintended consequences, including discouraging homeownership and slowing the pace of home appreciation.

Here’s how the new law affects homeowners:

  • Lower limits on mortgage interest deductions: Under the new law, homeowners can deduct interest on mortgages up to $750,000, down from $1 million. The reduction makes it more expensive to borrow money for high-priced homes.
  • Limits on SALT deductions: Previously all state and local taxes (SALT) could be claimed as an itemized deduction. Now all SALT tax deductions — including property, income and sales taxes — have a collective $10,000 cap.
  • Standard deduction doubled: The new law doubles the standard deduction to $12,000 for an individual filer and $24,000 for a married couple. That means fewer couples will have an incentive to itemize because their mortgage interest and $10,000-capped SALT deduction won’t exceed $24,000.
  • Home equity loan advantages gone: In the past, homeowners were able to deduct up to $100,000 in interest on home equity loans. That deduction is gone altogether, even if you take out the loan for real estate improvements. The change does not have a grandfather provision, meaning everyone with a home equity loan will be affected.
  • Most relocation deductions eliminated: Under the old law, you could deduct some of your moving expenses when relocating for a new job. Now, only active duty service members may deduct those costs.