Mark McNelis – Homeownership and Taxes
2022 Update. CPA Mark McNellis and I sat down to update the podcast we did back in 2018.
Are you wondering how the new tax laws will affect Glendale CA homes 2018 tax bill? Will you celebrate or cry? We sat down with Mark McNelis, CPA – Montrose local businessman, parent and community volunteer – for a first level look at how the new tax laws will affect homeowners, renters and business people.
Mark McNelis, CPA
The main impact on new home buyers.
The smaller mortgage interest deduction is capped at $750,000 (primary loan, HELOC)
If you use the home equity loan to improve the home you can deduct the interest on that (as long as you are under $750,000 total loans).
If you want to borrow MORE than $750,000 you can do so if you use the excess for BUSINESS purpose
Do the new tax laws decrease the tax incentive to be a homeowner vs a renter? The home prices in this area mean no. A homeowner still has significant tax advantages.
The total deductible amount for property, sales, and income taxes is capped at $10,000
Alternative Minimum Tax (AMT)
The loss of the state income tax and property tax deductions are not as severe because more of us will now qualify for AMT.
Mark ran an analysis on his client’s 2017 return as if they were under the 2018 rules. He found 9 out of 10 of his clients were equal or BETTER in their tax obligations.
How do Accessory Dwelling Units (ADU) affect your taxes?
If there is a second unit that is rented OR used as a home office allows you to take depreciation, insurance, and expenses on that unit. It also allows you to move all of those expenses to the business side of your tax bill, not your personal tax bill. This is important for anyone who currently has more than $750,000 in a mortgage.
Prop 60/90 – transfer your current property tax rate to a new home
If you are 55 or older you may roll your current property tax to a replacement home as long as a.) the replacement home is located in a participating county and b.) the replacement home is purchased for equal to or less than the sales price of the current home.
Bonus Tip: if you sell first, your replacement home can be 105% if purchased in the first year and 110% if purchased in the second year.
2022 Update: Prop 19 replaces prop 60/90 and provides more flexible ways for 55+ homeowners to move! Read my Prop 19 post here.
You can deduct up to $750,000 of the combined mortgages for your first and second home.
Deduct interest up to the level of the investment income you have.
Contact Mark McNelis