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How does the new tax plan impact me as a homeowner?

Any talk of taxes is sure to anger some and confuse most. But with a new tax plan in place, it’s important to know how the changes associated with the plan impact you as a current, or future, homeowner.

Here is a clear and straightforward breakdown of how the new tax plan affects homeowners in Louisiana.

New (reduced) cap on mortgage-interest deduction

Owning a home is the American Dream. For many reasons. However, one of the perks of owning a home is your ability to deduct mortgage interest from your income. That’s a perk renters don’t benefit from.

With the new tax plan, the cap for deducting mortgage interest is now at $750,000. That’s higher than what the House proposed ($500,000), but still is worthy of being aware of.

However, most homes in the Greater New Orleans area do not exceed $750,000. In fact, the National Low Income Housing Coalition estimates that just 1.9% of mortgages from 2013-2015 exceeded $750,000. California and New York homes make up more than half of those mortgages.

In short, this cap likely doesn’t impact you if you’re in the market for a new home. If you already own a home with a mortgage greater than $750,000, this new law doesn’t apply to you. It only applies to new mortgages.

The cap on mortgage interest reverts back to $1 million in 2026 regardless of when the home was purchased.

Taxes

On top of the changes to the mortgage interest deduction, the new tax plan limits how much of your property and state/local taxes you can deduct - to a combined $10,000.

Again, this doesn’t have a tremendous impact here in Louisiana as it does in the North East, or California, where home prices and property taxes are high.

But it does mean you might face larger tax bills starting this year.

Keep in mind, however, that the new plan doubles the amount of standardized deduction you can take ($12,000 for individuals and $24,000 for joint filers).

In other words, taking the standard deduction will exempt twice as much of your income from federal taxation. And if you currently itemize, it may be worth your while to take the standard deduction, which, in turn, limits how much income is subject to federal taxation.

Home-equity debt

Starting this year, interest paid on home-equity loans will no longer be deductible. And, you won’t be grandfathered in, either. The only exception is if you have a home-equity loan or second mortgage whose funds are used to substantially improve your home. In that case, the interest may still be deductible.

In 2026, the law will go back toward your ability to deduct for interest paid on up to $100,000 of home-equity debt.

Capital gains exclusion

You’ll still be able to exclude up to $500,000 ($250,000 for single filers) from capital gains taxation when you sell your home, as long as you’ve lived there for two of the previous five years.

Does the tax plan hurt or help homeowners?

Unfortunately, that’s not an easy question to answer. It completely depends on your unique situation. Generally speaking, though, homeowners in Louisiana may see some changes in their taxes. But with the increase in standard deductions, it might be worth your while to go that route vs. itemizing.

As always, talk to your financial advisor or accountant to know how the tax plan impacts you, specifically. Still, in the end, it’s clear that owning a home isn’t just the American Dream.

It makes good fiscal sense.

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