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Apr 16, 2018

Real Estate Tax Related Discussion

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Edited: Apr 16, 2018

Mortgage Interest Deduction

As of 1/1/2018, one may deduct mortgage interest on a loan up to $750K. This is a change from the 1 million cap before. This means one would be able to deduct up to $31,630 approximately for a 30yr fixed loan at 4.25% rate.

HELOC (Home Equity Line of Credit) may not be deductible unless used to buy or improve investment property.

 

 

One can also deduct any mortgage late payment fees or prepayment penalty if any in the tax year paid.

 

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Property Tax Deduction

Only up to $10k limit total

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Mortgage Point Deduction

For people who get the loan at lower interest rate sometimes they need to pay point to the lender. And this fee is deductible for the tax year you purchased your house.

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Mortgage Insurance

Premiums paid by home buyers- also tax deductible for an amount subject to an income cap limit starting at $100,000

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Home Exemption (property exemption)

Hawaii-Honolulu County has the lowest property tax rate in the nation $3.5 per $1000 assessed property value. The exemption amount is deducted from the tax assessed value of your property, and you pay property tax only on the assessed value of your home.

 

Standard Deduction is $80,000

Home Owner 65 yr and older $120,000

Hansen's Disease, Blind, Deaf, or Totally Disabled: $25,000 in addition to any exemption above

Disabled Veterans: exempted from all property tax except $300/yr minimum property tax

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MCC (Mortgage Credit Certificate

This is a first time home buyer tax credit of 15% of your annual mortgage interest.

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First Time Homebuyer-Penalty Free Retirement Account Withdrawls

Possible $10k to $20k for couples from your retirement account penalty-free for the purchase of your first home. (pls ask your CPA for more details)

 

Renewable Energy Credit

30% upfront cost credited dollar for dollar and the unused portion can be rolled over for the subsequent year tax liability. Note: 30% becomes 26% in 2020 and22% credit in its year 2021.

 

Energy Efficiency Improvement: Tax Credit up to life time credit limit of $500

 

Capital Gain Exclusion Tax Exemption:

$250k for single

$500k for couple

One needs to use the house as one's primary residence for 2 out of 5 years from the time of the sale.

 

NOTE

For rental properties converted into your principal residence for 2 out of 5 years owning.

The 2008 Housing & Economic Recovery Act effective on Jan 1st 2009.

After 2009, you may claim a capital gains exemption only for the time you used the property as your primary residence. Any use before 2009 does not count as nonqualifying use even if you rented it out.

 

Rental Properties converted into primary residence

If you move into a property that was purchased via 1031 exchange and start using it as your primary residence then you can claim the capital gain tax exemption only after you held the property five years since the 1031 exchange.

 

This article is for discussion purpose only and by all means not to be used or deemed as legal advise. Please consult with your CPA for professional advise.

 

 

 

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