The House and Senate passed tax reform legislation today. There's been a lot of hand-wringing over what this might mean for homeowners or those interested in owning a home one day. While it isn't a law yet -- President Donald Trump still needs to sign the bill for that to happen -- we now have a better picture of how homeowners are impacted.
The bottom line: It's a mixed bag, but it could have been much worse.
Here's what the House and Senate ultimately approved, according to the National Association of Realtors and media reports:
• Capital gains exclusion. This is the part of the tax code that dictates whether you pay taxes on profit earned when you sell your house. The 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.
Translation: If you're married and you pocket less than $500,000 on the sale of your home (or if you're single and you earn less than $250,000 on the sale of your home), you continue to pay no taxes.
This is considered a "win," by the NAR because earlier on in the tax reform discussions, the House and the Senate considered making it harder to qualify for the exclusion.
• Mortgage interest deduction. A USA Today story from five years ago said about a quarter of tax filers use this deduction. For loans taken out after Dec. 14, the new law would cap deductible mortgage debt at $750,000. Originally the House bill sought a reduction to $500,000.
The interest on a home-equity loan can be deducted as long as the proceeds are used to substantially improve the home. Mortgage interest on second homes can be deducted but is subject to the $750,000 limit.
• State and local tax deductions. Both property taxes and state and local income taxes remain deductible, though the proposed new law places a limit on how much a tax filer can claim as a deduction at $10,000. In earlier versions of this bill, both the House and Senate sought to eliminate this deduction altogether.
• Moving expenses. You can no longer deduct unreimbursed moving expenses, unless you are a member of the military.
• Estate tax. The proposed law would double the exemption on estate taxes to $11.2 million.
If you want to read more about how the tax reform legislation impacts homeowners, take a look at this Washington Post article.