Home-ownership is one of the pillars of the American dream. The US tax code has many tax breaks to encourage home ownership, even beyond the popular mortgage interest deduction. The US government understands that when people own their own homes, they are more likely to care for the property and the neighborhood in general. Also, people who are homeowners stimulate the economy by buying products and services to make their homes better. All in all, the government likes to encourage home ownership with the US tax code because it is good for everyone.

There are still good tax breaks available for homeowners in 2019, but with the Tax Cuts and Jobs Act that was passed at the end of 2017, some home-related tax breaks might not be as valuable as in the past.

For nearly a century the U.S government has held the virtue of owning a home high and thus encouraged consumers to purchase residential real estate. There are many worthy homeowner tax breaks available now and in the foreseeable future.

Here is a breakdown of the tax breaks for home ownership as they were in 2017 and how they will be affected in 2019 and beyond:

Property Tax Deduction

For 2017, your property taxes were usually fully deductible, unless you paid the alternative minimum tax. For 2019, your total tax deduction for all state and local taxes, including sales taxes, property taxes and income taxes is capped at $10,000 per year. This is a change that can hit people in higher tax states especially hard, such as California and New York.

Mortgage Interest Deduction

For 2017, you could usually deduct mortgage interest up to a total of $1 million in mortgage debt that you incurred to purchase, build or improve your principle residence and a second home. But for 2019, if the mortgage debt that you incurred was after mid December 2017, the deduction is usually going to be limited to $750,000. People who live in states with higher real estate prices will find that they cannot write off as much interest as they could before. But people who live in less expensive states will not be greatly affected by this change; few people live in homes in lower real estate price states with homes above $750,000. There is no doubt that the 2019 mortgage-interest deduction will continue to be embraced by homeowners and home-buyers.

Home Equity Debt Interest Deduction

For 2017, the interest on your home equity debt that was used for any purpose up to $100,000 was usually deductible. But for 2019, the new tax law no longer allows the home equity interest deduction. However, a recent update from the IRS has stated that the interest may still be deductible if the home equity is being used to improve the home. Make sure you get credible advice on home equity interest deductions as well as  tax-deductions on cash-out refinances.

Mortgage Insurance Premium Deduction

This tax break expired at the end of 2017 and was renewed for 2018. It is possible that Congress may extend it in 2019. The mortgage interest premium deduction is important for many homeowners because most people do not put down 20% to buy a home. If you do not have a down payment of 20%, you will need to have mortgage insurance. This policy will reimburse the lender for most of the remaining balance if you default on the loan. Mortgage insurance is expensive, but many people have it because they need it so they can buy a home with a lower down payment.

Home Office Deduction

For 2017, if your home office met certain criteria, you were able to deduct some of the associated expenses or use another method to claim the deduction. Employees could claim this as a misc. itemized deduction; this means there would be tax savings if the deduction plus other itemized expenses were more than 2% of your adjusted gross income. In 2019, misc. itemized deductions that are subject to the floor of 2% have been suspended. Only the self-employed worker can deduct their home office expenses.

Home Sale Gain Exclusion

When you sell your first home, you can exclude as much as $250,000 of gain if certain tests are met. Changes to this tax break have been proposed, but they were not put into the new tax law.

Debt Forgiveness Exclusion

This tax break in 2017 was for homeowners who got debt forgiveness in a short sale or foreclosure. It has been suspended and it has not been renewed, but it is possible Congress will enact it again.

Generally, homeowners are not getting as many tax breaks on their homes as they did before. One of the reasons is that is the case: The standard deduction was more than doubled, so many Americans, even homeowners, are taking the standard deduction now instead of itemizing their taxes.

References http://www.delawarebusinesstimes.com/home-related-tax/