2018 Tax Law Seminar

I attended an informative seminar this morning.

Thomas Fitzpatrick, CPA, from the local accounting firm of Fitzpatrick, Bongiovanni, and Kelly provided an overview of the laws (both new and unchanged) applicable to the shore real estate market.

A few key points:

1) The exclusion of gain on the sale of a principal residence did not change ($500,000/$250,000 depending on filing status). Must be owner occupied 2 of the past 5 years.

2) Mortgage interest deduction is now capped at $750,000 of debt.  Current loans secured prior to 12/14/17 are grandfathered under the prior cap of $1,000,000. Home equity interest is no longer deductible.

3) Deduction for state and local property taxes is capped at $10,000 for primary and secondary homes.  If a property is held as a rental, the property taxes are treated as an expense on schedule C of your tax return.

4) Capital gains rates remain the same. Depending on your income, the rate is 15% to 20% (plus 3.8% investment income tax).

5) The rules for a 1031 Tax Deferred Exchange (also called Like-Kind Exchanges) remain the same.  An investment property (a rental) can be sold and replaced with another investment property; allowing the seller to defer the capital gains tax due to the IRS and State of New Jersey.

I am happy to help with additional information, or direct you to the appropriate tax professional.