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Tax overhaul reduces interest deduction on taxes

The tax overhaul may be a good thing for some Minnesotans, but for homeowners, it could be a bad deal. According to the news from Dec. 21, the new deal would mean that many homeowners in Minnesota would no longer qualify for a mortgage interest deduction, which is normally given on the annual tax return.

The new tax bill has already been approved through both houses of Congress, making it likely to become law. The people who will benefit aren't usually those who need it most, and it shows in this case as well. The people who are most likely to suffer as a result of the changes include those who use the State and Local Tax deduction, which is also known as SALT. That deduction is being reduced to $10,000.

Fortunately, current mortgages aren't affected, but if you're looking to buy, you could end up facing a higher tax bill. Presently, individuals can deduct up to a million dollars of their interest off their taxes in exchange for the standard deduction. With the changes, many people, particularly those with high-interest rate loans or more expensive homes, will be left with a much higher tax bill.

One good thing is that the standard deduction will double with the new proposed bill, so at least homeowners get a higher standard deduction than they presently would. This change could be good for you, or it could end up costing you more than you expect. Your attorney can help you understand how it may affect your mortgage and overall tax liability in the year to come.

Source: Patch, "GOP Tax Overhaul: How Minnesota Homeowners Will Be Affected," William Bornhoft, Dec. 21, 2017

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