This week, House and Senate Republicans reached a deal on a final tax bill and it appears they will try to pass the bill before the end of the year. Don't worry, this isn't a lengthy summary of everything that's in the bill. I'm pretty sure you aren't interested in reading an article like that. That is, of course, unless you need a sleep-aid.
I want to focus on two provisions in the bill that could negatively impact you. In addition, I'll recommend actions you can take before December 31st to take advantage of tax breaks that are being reduced. Think of these as "use it or lose it" suggestions.
Let's get to it!
Mortgage Interest Deduction
Under current law, homeowners can deduct mortgage interest paid up to $1 million of mortgage debt. The original Senate bill retained the $1 million cap while the House bill lowered the deduction to $500,000. Capping the interest deduction to only $500,000 of mortgage debt would have negatively impacted homeowners in regions that have high-priced homes, such as Washington, D.C., New York, and California.
A compromise was reached on the final tax bill: It appears the deduction will be limited to the first $750,000 of mortgage debt.
Solution: If you have mortgage debt greater than $750,000 and less than $1 million, you should make your January 2018 mortgage payment before December 31st of this year. The interest paid will be allocated to your 2017 payments. You'll receive Form 1098 from your lender in early 2018. Check it to ensure the extra interest was captured in 2017. Unfortunately, only one extra payment is allowed. Any extra payments will have the interest allocated to 2018.
State and Local Tax Deductions
Currently, homeowners can deduct the full amount of property taxes paid. Both the Senate and House tax bills will limit the deduction to $10,000.
Solution: You can prepay some or all of your 2018 property taxes and the IRS will allow you to deduct that amount on the current year's taxes. If you decide to do this, I recommend contacting your local tax authority to ensure they credit your payment for 2017.
Listening / Playing / Reading / Watching
Here's what has my attention right now:
- Persepolis Rising by James S.A. Corey. This is the seventh book in the seriously great Expanse series. If you're into science fiction and want a good space opera, I highly recommend starting with book one, Leviathan Wakes. Think of the Expanse series as Game of Thrones in space.