It was a very dramatic moment in our nation’s history. One that might affect YOU for a very long time to come.
After long weeks of debate, the U.S. Congress recently passed the most sweeping overhaul of the U.S. Federal tax code since 1986.
How does this impact you as a Maine homeowner—or as someone planning to buy or sell a house in Maine? Let’s take a few minutes to look at the changes in the law and exactly what they mean for you.
First, a News Blast About
Maine Tax Reform
Before we dive into the changes in the Federal law, we also need to let you know about a tax-law change just enacted here in Maine. Under a revision to the Maine Homestead Exemption, the exemption for Maine property taxes was raised from $15,000 to $20,000. So (for example) if your house is valued at $200,000, your town will reduce your home’s tax value to $180,000 before applying the tax rate. You can qualify if you have owned your home in Maine for at least 12 months.
Be sure to bear this change in mind, because—as we’re about to see—the new Federal tax changes now “intersect” more actively with your Maine property taxes.
Specifics of Homeowner Tax Reform
Under the Federal Law
Okay, so now let’s look at the new Federal tax laws that will affect you as a homeowner. Principally they are:
Standard Deduction Increase
The new Federal law increases the standard deduction for single filers to $12,000, and to $24,000 for joint/married filers. This can be very significant for you as a homeowner, because it now may be more advantageous for you to take the standard deduction, rather than to itemize by taking the mortgage- interest deduction and property-tax deduction.
The new Federal law caps the limit on deductible mortgage-debt at $750,000 if you took your loan after December 14, 2017. (Loans made before then can legally deduct interest on mortgage-debt up to $1 million.) You can also refinance mortgage-debt that existed before December 14, up to $1 million. And you can still deduct the interest, as long as your new loan does not exceed the amount refinanced.
Your property-tax deduction is now limited to $10,000, a change that could have the effect of raising the tax bill for many Mainers. This is why—as mentioned above—a significant amount of folks in Maine may choose to take the now-higher standard deduction rather than itemizing.
Capital Gains Exclusion
If you sell your primary house, you can now exclude up to $250,000 (for single filers) or up to $500,000 (for joint/married filers) for capital-gains-tax purposes. The only stipulation is that you have to have lived in the residence for two of the past five years.
When it passed the sweeping Federal tax reform, Congress said most Americans will be favorably affected by it. We hope that’s true for you and your family, and are always here if you have questions about how tax reform affects you.
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