1. Home equity loan interest is no longer deductible.
Since you cannot deduct interest on home equity loans or lines of credit from your income taxes anymore starting in 2018, it may make sense to pay these off depending on your situation. Mortgage interest deductions on home loans going forward can still be deducted, but are reduced to interest for the first $750,000 on new home loans (down from $1 million.)
2. Property tax deductions are limited.
The new law caps deductions for property taxes and state and local income taxes to a total of $10,000 per year starting in 2018. This may raise taxes for some people who live in areas or states with high tax rates.
3. Personal exemptions are no longer allowed.
Although the standard deduction doubles beginning this year (it will revert back to 2017 levels in 2026), personal exemptions have been removed. As of 2018, you will no longer be able to deduct $4,150 from your income for each person you claim. This primarily affects families with minor children, but may also affect people who care for and claim their elderly parents as dependents. The new law does allow a $500 credit for each non-child dependent.
4. Sale of primary residence still avoids taxation for most people, up to $500,000 for married couples, $250,000 for singles.
This tax benefit remains in place, and may be part of your retirement strategy going forward. You may want to sell a primary residence (you have to have lived in it for at least two of the last five years) in favor of a smaller home in an area with lower property taxes.
5. The estate tax exemption was raised, doubling to $22.4 million for couples.
This doesn’t mean you shouldn’t have an estate plan in place, in fact, nearly everyone should. Avoiding probate and probate costs, having a will and/or trust in place, and planning ahead for possible long-term care needs is critical to a sound retirement plan.
At Alpha Beta Gamma Wealth Management, we work closely with your CPA and estate attorney to bring the financial issues that affect you into complete focus. Let’s review your retirement plan and discuss what we need to do going forward. Call us to schedule an appointment at (866) 837-0999.
“Trump’s Tax Plan and How It Affects You.” Thebalance.com. https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968 (accessed January 8, 2018).