The massive tax reform bill passed by the U.S. Congress this week is headed to the President’s desk to be signed into law. The bill makes sweeping changes to the U.S. tax code and was initially opposed by the National Association of Realtors® because of the potential for serious impacts to current and future homeowners. In an incredible advocacy victory, NAR was able to work with Members of Congress to retain important tax provisions that promote homeownership which allowed NAR to be neutral on final passage of the bill.
NAR fought for some very important changes that were made in the bill during the conference committee. These changes include:
- Capital gains exclusion. In a huge win for current and prospective homeowners, 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. Both the House and the Senate had sought to make it much harder to qualify for the exclusion.
- Mortgage interest deduction. The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit. The House bill sought a reduction to $500,000.
- State and local tax deductions. Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000. Both the House and Senate bills sought to eliminate the state and local income tax deduction altogether.
- Pass-through entities. The bill significantly reduces the effective rate of tax on business income earned by independent contractors and income received from pass-through entities. This change will lower the taxes of many real estate professionals.
To read more about the final bill and how it may impact your business and your clients, click here to access NAR’s dedicated tax reform site.