Just last week, President Trump signed into law a new tax bill. For some, it may help. For others, it may not. How will the new tax bill affect Silicon Valley homeowners? You might want to consider paying some extra money before the new plan begins on January 1st, 2018.
Silicon Valley Homeowners and the New Tax Bill - The Good
Under the new tax bill, the standard mortgage deduction for individual filers will be $12,000. For married couples filing jointly, it'll be $24,000. This doubles the current deduction. For those who don't itemize their taxes, this is great. However, for Silicon Valley homeowners, you might want to consider itemizing. Expecting a year-end bonus or one more paycheck before 2017 comes to a close? Ask to defer it to January 1st. Many Silicon Valley homeowners might find themselves in a lower tax bracket. If you don't receive this income until the new year begins, you could end up with a higher net income on their paychecks.
Silicon Valley Homeowners and the New Tax Bill - The Bad
Many people across the U.S. could see a little more money in their pockets for a bit of while under the new tax bill. However, luxury markets like Silicon Valley will feel a bit of a sting. Currently, you're allowed to deduct the interest paid on as high as a $1,000,000 mortgage. But, as you're aware by now, as of October 2017, even the San Jose average sale price hit above $1,000,000. As of the most recent stats available check out the latest edition of the Silicon Valley Market Report. The Los Altos market showed an average sale price of $3,264,678. On the plus side, if your mortgage was taken out before December 15th, 2017, you'll automatically be grandfathered in at the previous $1,000,000 cap.
Another place Silicon Valley homeowners may feel a pinch is when it comes to their state and local taxes (SALT). Currently, all local taxes (income, sales, and property) are deductible. As of January 1st, there's a $10,000 cap. And, homeowners must choose between one of the three instead of utilizing them all.
What Can Silicon Valley Homeowners Do to Save Some Money Before the End of the Year?
First, financial experts suggest that you make an extra mortgage payment before December 31, 2017. The mortgage interest paid can then be deducted when you file your 2017 taxes. Next, pay your Silicon Valley property taxes early. Just make sure you talk to your lender or mortgage company first if your taxes are automatically get paid through your escrow account. You don't want to end up paying twice or get hit with a prepayment penalty of any kind. Also, you have four more days to make some charitable contributions. Your church, the local Salvation Army or Goodwill, women's shelters, and animal rescue organizations always appreciate any donations you send their way. Finally, make sure that you have met all your contribution limits for your 401(k), IRA or Roth accounts. For 401(k) accounts, the limit is $18,000 of pre-tax money. If you're 50 years old or older, it's $24,000. IRA and Roth accounts each have $5,500 limits. While the new tax bill doesn't affect any of these limits, it's always a smart money move to make.
Always talk to your financial adviser or Tax Advisor before making any significant money decisions. I'm not a tax expert. Nor am a licensed CPA. They know your specific financial situation as well as the ins and outs of the new tax bill. They can tell you which options are the best for you.