How will Tax Reform Impact the Mortgage Interest Deduction?
Tax reform has been a major issue in the United States this year. When President Trump was on the campaign trail, he promised a better tax code that would make the United States more competitive with other nations.
Over the past few weeks, the tax code has been refined and changed through vigorous debate. It looks like the tax reform bill will be signed into law by President Trump soon.
As a taxpayer, it is critical to understand the key changes to the tax code. Some people wrongly assume that the tax code will completely change. In reality, there are just a few key variations to consider.
Standard Deduction
The standard deduction is a fundamental deduction that everyone has the option to use. When filing your taxes, you have the option to itemize your deductions or use the standard deduction. With the new tax reform bill, it is likely that more people will use the standard deduction because it doubled in size.
For people who itemize their deductions, it may make more financial sense to move to the standard deduction. You can itemize expenses like mortgage interest or student loan interest. For people who do not have various deductions, the standard deduction makes the most financial sense.
Mortgage Interest
The mortgage interest deduction is the most common deduction used today. It is most often used by people who own a home with a large mortgage payment. Although the mortgage interest deduction is still available, fewer people will use it when they file their taxes for 2018. There are a lot of people who struggle to understand the tax code. This is why working with a professional tax planner is so important.