If you’re considering the purchase of a new home – including a newly built custom residence – you may find that there are some areas of the tax law going forward that could affect you and your finances.
For instance, for many years, the interest deduction on home mortgages has been a key tax incentive. But, while you can still deduct at least some of your mortgage interest, for those who purchase a home between now and 2025, interest can only be deducted up to $750,000 in mortgage debt.
This debt, however, includes a mortgage that is used to purchase and / or improve a home. (If you took out a mortgage on or prior to December 14, 2017, though, you can deduct interest on up to $1 million in debt).
With the new tax law, you may also deduct mortgage interest that is associated with the purchase of a second or vacation home. Here, you can deduct interest or mortgage debt of up to $750,000 beginning in 2018 (this amount is $375,000 in mortgage debt if you are married and you file your taxes separately). So, if you have a vision of constructing the ideal second home in Orlando, you can still see some benefits from a tax-related standpoint.
If you are planning to sell your current residence, the prior capital gains rule remains unchanged. Here, you are allowed to exclude up to $500,000 of capital gain (or, $250,000 if you are married and filing separately). In this case, though, you must have owned your home – and used it as a primary residence – during at least two of the past five years before you sell it.
If you’re considering building a new home in Orlando or the surrounding Central Florida, area, we can help. Set up a time to chat with us and we can provide you with more information on the cost and time table on turning your dream home into a reality.