Will I lose my mortgage deduction in 2018 with the increased standard deduction?

[Hank]

hightower wrote:

 

This is precisely why real estate markets in HCOL areas are going to see a major decline very soon IMO.

Click to expand...

I disagree that real estate markets in high tax, high cost of living areas will see a "major decline".  I would expect the price of properties that currently are  $750K to $1M will grow more slowly over the next 2-3 years.

Likewise, I would expect to see a lot of houses that ought to cost $650K or $700K to sell for $750K now so people can "maximize their tax savings".

[StarTrekDoc]

Yeah -  2017 --  Calculate your AMT space - then maximize to that point by:  Prepaying 2018 property tax (one time benefit)  and the rest as a DAF (to cover your 2018 donations).     Hopefully that would be enough to push you into a standard 2018 and then load up for 2019 itemized with DAF bolus

That's our plan over the next decade to do since we have a fair of amount of donations.

[rallycobra]

Thank you, I think I understand now

For 2018 :   Itemized deductions =  max $10k SALT + Mortgage Interest + Charitable Donations

If your itemized deductions are less than $24k, you can use the larger standard deduction of 24k. If you take the standard deduction your mortgage isn't deductible.

 

For 2017, consider paying future property taxes if you aren't in the AMT. Also, for NJ estimated taxes, make the last 2017 payment IN 2017. They are due 1/15/18 but can be paid before the end of the year. Don't underpay them either. For maximum benefit you probably want a small refund coming in April of 2018.

[hightower]

rallycobra wrote:

I could pay the mortgage off and it wouldn’t change my taxes.

 

Click to expand...

This is going to be a common theme in years to come.  For most people, there is no longer an advantage to holding onto a mortgage.  It would be better to sell my home, downsize into something I can pay cash for and enjoy the benefits of not paying interest to a bank any longer.  Now my only task is to convince my wife of this.  My house isn't very expensive really, but I still don't want to be paying 4% interest on a 290k loan for the next 20 years with zero tax benefits.

This is precisely why real estate markets in HCOL areas are going to see a major decline very soon IMO.

[VagabondMD]

Add your $10k (state and local taxes, property tax, sales tax roll up) to your charity and mortgage interest. If that number is greater than $24k, you will be itemizing. If it is lesser, you will be taking the standard deduction.

By the end of the year, so long as it does not trigger AMT, you could benefit from aggregating future charitable contributions (by making them now, or opening or contributing to a Donor Advised Fund (DAF) and or prepaying 2018 property tax (if your locality allows it). This is a "one-time" hack that will not be useful going forward.

[rallycobra]

I'm in NJ, married filing jointly, and have high property and income taxes.

Looking at my 2016 Schedule A, I see deductions for State Income taxes, Property taxes, Mortgage interest, and charitable donations.

 

My property tax is well over $10k, so that will max out the $10k SALT (State and Local Taxes) limit.

 

My mortgage interest and donations are significantly below the $24k standard deduction for 2018. Will I claim the 24k standard deduction in 2018? In effect, it negates the mortgage interest deduction. I could pay the mortgage off and it wouldn't change my taxes.

 

I suggest everyone read this excellent article. It's a very helpful for comprehension of your tax return

https://www.whitecoatinvestor.com/understanding-your-own-tax-return/