Impact of Tax Reform on WI Real Estate

Here are 10 ways the Wisconsin Real Estate Market will be impacted by the 2017 Federal Tax Reform:

1. Mortgage Interest Deduction
The new law reduces the mortgage interest deduction from $1 million to $750,000 and maintains the deduction for second homes for mortgages issued prior to December 15.

2. Doubling of the Standard Deduction
The new tax law doubles the standard deduction to $24,000 for married couples who file jointly and $12,000 for single filers.

3. Home Sale Capital Gains Exemption
On the of the items to go unchanged thankfully the capital gains exclusions for the sale of a primary residence remains at $500,000 for a married couple at $250,000 for an individual as long as you lived in the property 2 of the last 5 years.  Earlier versions of the proposed legislation changes pushed for a person to live in a property 5 of the last 8 years before they could claim this exemption.

4. State and Local Taxes (SALT)
The new tax law places a cap on the deduction for state and local taxes, allowing taxpayers to deduct up to $10,000 of state and local taxes, including property taxes and the choice of income or sales taxes.

5. Pass-Through Business Income
The tax rate for pass-through entries like solo proprietorships, LLCs and partnerships is reduced from 39.6% to 20%.

6. Home Equity Line of Credit (HELCO)
The deduction for interest on home equity loans/lines of credit is eliminated beginning in 2018 with no grandfathering of existing loans.  There is possibly an exception being discussed if a home owner can prove the loan was used directly for improvements to the home.

7. Like-Kind Exchanges
Also known as 1031 Exchanges, like-kind exchanges are maintained under the new law and allow a property owner to defer the payment on taxes on profits from the commercial property sales if the owners reinvest those profits into similar commercial property.

8. Depreciation
The depreciable life of both residential and commercial real estate property is reduced from 39 years to 25 years.

10 Moving Expenses
The new law eliminates the deduction for moving expenses/costs.  Under the prior law, a homeowners could claim a deduction for reasonable moving expenses if the new workplace was at least 50 miles from the home.