Lawmakers in the House and Senate passed tax reform legislation today, paving the way for the bill to go to President Donald Trump for his signature. The President has said he intends to sign the bill by Christmas.
Last-minute changes to the bill include the following improvements:
• Capital gains exclusion. In a huge win for current and prospective homeowners, current law is left in place on the capital gains exclusion of $250,000 for an individual and $500,000 for married couples on the sale of a home. Both the House and the Senate had sought to make it much harder to qualify for the exclusion.
• Mortgage interest deduction. The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit. The House bill sought a reduction to $500,000.
• State and local tax deductions. Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000. Both the House and Senate bills sought to eliminate the state and local income tax deduction altogether.
• Pass-through entities. The bill significantly reduces the effective rate of tax on business income earned by independent contractors and income received from pass-through entities. This change will lower the taxes of many real estate professionals.
