The National Association of Realtors (NAR) opposed many measures of the tax bill soon to be signed into law. Most significantly the diminished value of the mortgage deduction and the cap on how much state and local taxes can be deducted there were some SIGNIFICANT items which were left in place:
• 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. You may still sell a property which was your primary residence for 2 of the last 5 years and not owe capital gains taxes on up to 250k for individuals and 500k for married households.
• 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. So in Florida where we fund public operations though the real estate taxes and thus have high real estate taxes (BUT NO STATE INCOME TAX) some people will exceed the 10k limit.
• 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.