t just might bite you, now or in the future.
For example, Section 1402 of the proposal would significantly alter the ground rules governing a benefit that millions of homeowners have factored into their financial planning for decades. Under current law, you can exclude from taxation the first $250,000 of capital gains on a sale as a single filer ($500,000 filing jointly) provided you have used the house as your principal residence for an aggregate two years out of the five years preceding the sale. Plus you can use the exclusion as frequently as once every two years.
Under the Republican proposal, the two-out-of-five standard would vanish. Instead you d need to live in and use the property as your main residence for five of the preceding eight years a requirement designed to lower the number of people eligible to claim the exclusion. This would inevitably hurt middle income and other families who were forced to sell their houses because of job transfers or medical reasons, as well as first-time buyers moving up to a new home a few years after purchase as their families expand. The bill also would limit use of the tax-free exclusion to once every five years, up from the current two years.
Another noteworthy change that s easy to miss: Section 1302 of the bill, which would slice the mortgage-interest deduction in half, includes a single sentence that could be important to many Americans who own second homes. It says simply that taxpayers can have only one qualified residence. With that brief redefinition, the bill would eliminate thousands of homeowners ability to write off mortgage interest on second homes and weekend getaway houses. Removing the deduction would increase the cost of ownership on potentially millions of second homes. According to a study last year by the National Association of Home Builders, 7.5 million second homes qualified for the mortgage interest deduction, based on the latest available Census Bureau survey data.
Then there s the whole issue of when the housing changes proposed in the bill would take effect. Traditionally major tax bills contain transition periods to give affected taxpayers time to adjust. That could happen with this bill as well, but at the moment, the starting dates included for housing provisions are shocking. Check out these effective dates as they currently stand in the bill:
The reduction in the mortgage-interest deduction ceiling,
爱上海同城 plus deductions for second homes, would take effect on loans taken out after Nov. 2. Not only is there no transition time, the changes are essentially retroactive. This could negatively impact shopping, sales even prices on homes closed after Nov. 2.
The capital-gains exclusion changes would cover home sales after Dec. 31. No grandfathering, no wiggle room.
The capping of deductions for state and local taxes to $10,000 currently there is no limit for taxpayers who itemize would start for everybody after Dec. 31. Note that only property taxes could qualify for even this limit sales and income taxes would no longer be deductible.
Expenses related to moving from one home to another no longer would be deductible after Dec. 31.
You might be wondering: Could all this nasty targeting of homeownership actually make it through Congress and get signed into law? Certainly the major real estate lobbies the National Association of Home Builders and the National Association of Realtors plan campaigns to block the housing changes as the bill moves through the House and the Senate unveils its version.
But keep this in mind: The Republicans are desperate to pass a tax cut bill by year s end. There are plenty of obstacles in their way even from within their own ranks. But it could happen.
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