The Tax Cuts and Jobs Act (TCJA) resulted in many changes to tax law. These changes will directly impact property owners. Four specific examples include:
- Standard deduction. The TCJA increased the standard deduction from $6,500 to $12,000 for individuals and $13,000 to $24,000 for married couples who file a joint tax return. This is notable when it comes to property tax breaks as the property tax break is only available for those who file an itemized deduction. The change made by the TCJA will likely encourage people to file based on a standardized deduction as opposed to an itemized deduction. If successful, the increase in the standardized deduction could make the property tax deduction a non-issue.
- Local tax deduction limits. The law also limits the deduction available for local and state tax payments. In the past, those who itemized tax deductions could deduct all state and local income, sales and property tax. Now, this deduction is limited to $5,000 for single filers and $10,000 for married.
- Casualty losses no longer an option. The TCJA also removed the deduction for casualty losses. This deduction allowed homeowners that suffered an economic loss from their property due to unexpected damage from a sudden event to deduct these losses. Events that generally qualified included fires and tornadoes.
- Limitations on re-fi deductions. In the past, home owners could refinance their property and use the funds to cover the cost of other expenses, like a college education. This is no longer an option. The TCJA specifically removes this option, only allowing the deduction for loans used to improve or build a home.
A failure to properly follow these new tax laws could lead to a dispute with the Internal Revenue Service (IRS) over your tax obligations. Those who find themselves with such a dispute do not need to navigate the issue alone. An attorney with experience dealing with the IRS can help.