Real estate experts are anticipating that the new GOP tax bill could bode poorly for New York homeowners due to new restrictions on their property tax deductions,so much so that many owners rushed to pay their 2017 taxes before the end of the year.
But what does the sweeping new legislation mean for renters? There's some disagreement there.
The new law is a "win" for renters, a conservative columnist for the New York Post argues, as it will "level the playing field" between owners and renters by capping the mortgage interest and property tax deductions homeowners can take, while doubling the standard deduction for everyone.
On the other hand, one analyst tells reporters for the Washington Post that the law could discourage first-time home buyers, who might opt to continue renting instead, which could mean more competition in the rental market.
The truth is, no one knows for sure yet what the long-range effects of the bill will be, for owners or renters.
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"We're all still trying to sort it all out and get proper guidance," says Koreen Jervis of Korjé Tax Professionals.
Renters and owners alike will face a few changes to their itemized deductions. First, the standard deduction amount will increase, from $6,500 to $12,000 for individuals, $9,550 to $18,000 for heads of households, and $13,000 to $24,000 for married couples filing jointly.
The increase is intended to compensate for new caps placed on other deductions, including property tax and mortgage interest deductions.
Renters don't benefit from such home-ownership-based deductions, but freelancers who work from home may be wondering how the legislation could affect their ability to take a home-office deduction.
Most, Jervis says, should still be able to write off the portion of their apartment that they use as office space.
"This isn't meant to affect a freelancer who is self-employed, and all their income is 1099," she says—that is, independent contractor income rather than the W-2 income of salaried workers.
The changes to itemized deductions are primarily on the Schedule A tax form, which is filled out by regular, salaried employees. Schedule C forms are used by self-employed people to report profits and losses and deduct business expenses.
"People who are self-employed can still deduct," Jervis says. "The changes are mainly to the Schedule A form. What they've basically done is cut many of the deductions out and are giving a higher standard deduction, which in essence doesn't really help a lot of people."
One group the bill is definitely expected to help? Landlords. Large, real-estate-owning corporations and small-time real estate investors alike get new tax breaks under the overhaul legislation. Something to keep in mind, perhaps, when it comes time to negotiate your lease renewal.
Also, keep in mind that the tax rules affect this year's income, but not the taxes that you are due in April, which cover last year's, so you still have some time to figure out with your accountant how best to proceed.
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