When it comes to owning a home, it’s not just about the property itself—it’s also about how the tax code treats your investment. Two recent changes that you may not have realized could have an impact on homeowners, and while they won’t affect everyone, they’re worth knowing about.
1. State and Local Tax (SALT) Deduction Cap Raised
For years, homeowners—especially those in higher-tax communities—have felt the squeeze of the $10,000 state and local taxes (SALT) deduction cap. That cap included property taxes, income taxes, and other state and local levies, and it limited how much taxpayers could deduct on their federal returns.
The new federal tax law just raised that cap to $40,000.
What does that mean?
- Homeowners in communities with higher property taxes (think North Shore and other suburban areas) may now be able to deduct much more than before.
- This doesn’t erase your tax bill, but it could provide meaningful relief at filing time.
- Keep in mind: this benefit begins to phase out for higher earners, so it won’t apply equally to everyone. However, as we know, changes happen often so we will see if this phase out stays on schedule.
2. Mortgage Interest Deduction: $750,000 Is Here to Stay
The second change isn’t really a change but a confirmation. Since 2017, the mortgage interest deduction has been capped at $750,000 for most new mortgages. Originally, this was supposed to expire after 2025 and revert back to $1 million.
That’s no longer the case. The cap has been made permanent.
What does that mean for you?
- If you bought your home after December 15, 2017, you can deduct mortgage interest on balances up to $750,000.
- If you locked in your mortgage before that date, you’re grandfathered into the old $1 million cap.
- Interest on home equity loans or HELOCs is still only deductible if used for home improvements.
Why This Matters
For Illinois homeowners, particularly in higher-tax communities, the combination of a higher SALT cap and clarified mortgage interest rules could provide some breathing room on your federal return. This won’t change your monthly payment, but it might reduce your after-tax cost of owning a home which is something worth keeping in mind as you plan for the year ahead.
Final Word
I want to be clear: I’m not a tax advisor. Every individual’s situation is unique, and the benefits of these deductions will vary widely depending on income, property taxes, and other factors. If you’re a homeowner in Illinois, this is definitely a conversation to have with your CPA or tax professional.
As always, my goal is to keep you informed on how changes in the law or shifts in the market could impact your experience as a homeowner.
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