2018 is well underway and tax season is here! Tax deductions are definitely one of the benefits of homeownership that you don’t want to miss.
If you have any questions on what items are deductible regarding your real estate transaction, my best advice is to consult your tax advisor or accountant. However, the most common deductions for homeowners are as follows:
- Mortgage Interest
- Real Estate (Property) Taxes
- Mortgage Points Paid at Closing
- Private Mortgage Insurance (PMI) – this deduction is no longer available starting the 2017 tax year.
I would also recommend comparing the benefit from itemizing your tax deductions to the standard tax deductions available to all taxpayers. In some cases, the standard tax deduction may be more beneficial so you want to make sure that you make the best decision for your household.
Property Tax Exemptions
I would also encourage you to file for the homeowner exemption for your property taxes. Homeowner exemptions reduce the amount of property taxes due. Remember that taxes for Cook County are paid a year in arrears so you will be filing for a reduction in your property taxes for next year. The Cook County Treasurer site has a great tool to determine if you are receiving available exemptions, click here for link. For a description of the available property tax exemptions in Cook County, click here. This link also contains the form needed to apply for the exemption.
In Will County, you should check your tax bill to confirm that you are receiving the Homestead Exemption. This information is located in the right-hand column. More information is available on the Will County and Frankfort Township Assessor websites.
Impact of New Tax Plan for Homeowners
The new tax plan passed in December 2017 won’t really have an impact on your 2017 taxes. However, you may want to talk to your accountant or tax preparer so you are aware of the changes for the 2018 tax year.
There are 4 major elements of the tax plan that will affect homeowner deductions:
- The biggest impact for Chicago area homeowners will be the limit on federal deductions for local and state income and property tax deductions to $10,000 combined.
- The mortgage interest deduction is limited to $750,000 for homes purchased after December 15, 2017. For homes purchased prior to that date, the mortgage interest deduction remains at $1,000,000.
- Interest on home equity loans, second mortgages and home equity lines of credit (HELOCs) are no longer deductible unless funds were used substantially for home improvement. This tax deduction was not
grandfathered so existing loans will lose this deduction.
- Sellers will continue to be able to exclude up to $500,000 ($250,000 for single tax filers) from capital gains taxation as long as they have resided in the home for at least 2 of the previous 5 years.