On Friday morning, President Trump signed the sweeping tax reform bill recently passed by Congress into law.
Trump's signature official makes the $1.4 trillion tax-cut bill the law of the land, ending months of debate, negotiation, voting, and revoting. Congress gave their approval to the final version [1] of the bill earlier this week, with the Senate approving the bill 51-48 early Wednesday morning. The House originally voted in favor of the bill on Tuesday, but a technicality forced them to revote on Wednesday, finally passing the bill with a vote of 227-203.
President Trump also signed an emergency funding bill that will keep the government open and operating through January 19. The resolution maintains current levels of funding through that date, and also funds the Children's Health Insurance Program through March.
In a recent statement about the tax bill, President Trump said, "I promised the American people a big, beautiful tax cut for Christmas. With final passage of this legislation, that is exactly what they are getting."
Here's a look at what the changes mean for homeowners, buyers, and sellers:
- Downsized mortgage interest rate deduction: New homebuyers would now only be able to deduct interest on the first $750,000 of mortgage debt on a newly-purchased home—down from the current $1 million thresholds, but higher than the $500,000 limit the House proposed in its tax overhaul in November. While the deduction has helped make homebuying more affordable for some homeowners, buyers in some cities face much higher price tags.
- Less reason to itemize: Homeowners must itemize their taxes if they want to claim the mortgage interest deduction. But since the final bill calls for nearly doubling the standard deduction, far fewer Americans are expected to itemize.
- Limit on property tax deduction: Taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. Instead, the legislation allows individuals to deduct up to $10,000 in state and local income and property taxes or state and local property and sales taxes. That means homeowners living in high-tax states like New York, California, and New Jersey could see an increase in what they owe.
- Tax break stays for home sellers: Both the House and Senate bills originally wanted to scale back a tax break for homeowners when they sell their home for profit. Taxpayers will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains when they sell their primary home, as long as they've lived there for two of the past five years. Earlier tax reform proposals would have increased the live-in requirement to five out of the last eight years.