How the New Tax Laws Could Affect Mortgage Deductions and Divorce Settlements
Family law clients often ask their attorneys if they can take the mortgage deduction for their house. Certainly this deduction can provide a tax benefit and an incentive for the spouse who is paying the mortgage. The new tax law, if approved, may affect the deduction especially for those who live in wealthier areas. Beginning in 2018, deductions will now be capped on mortgages $750,000 or less. So if you have a mortgage for $850,000 you will only be able to take the deduction up to $750,000. This is a change in the current law which allows a deduction for mortgages up to $1 million. Interest on home equity loans will no longer be deductible on your taxes. Additionally, tax deductions previously permitted for state and local taxes as well as property taxes will also be capped at $10,000. As a result of these proposed changes, more taxpayers may use the higher standard deduction instead of the itemized deductions. Consultation with your family law attorney and accountant may be necessary in negotiating your divorce settlement due to these proposed changes.
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Disclaimer: The contents of this post are for informational purposes only, are not legal advice and do not create an attorney-client relationship.