New Year, New Tax Legislation: Will You Benefit or Bust in 2019?
It’s tax time — are you among the 3 out of 10 taxpayers who admit to being unsure what’s changed since new tax legislation became effective? Knowing the major changes can help you prepare your return — or get ready for your meeting with your financial advisor — to reap the maximum benefits or mitigate the damage.
Retirees, especially, could see major changes in either direction. The biggest change to note is an increase in the standard deduction. It’s nearly doubled: $12,000 for single filers and $24,000 for married filers. Many older taxpayers have downsized or don’t carry a mortgage, and therefore have limited expenses to itemize. Depending on how your itemized deductibles add up, you can decide whether it makes sense to itemize or claim the standard deduction, saving you the effort and tax-preparation costs.
While many popular deductions were eliminated with the new legislation, there are still several you can claim if the numbers add up in your personal situation:
- Mortgage-loan interest
- Property tax
- Self-employment deductions
- Educator expense
- Student loan interest
- Relocation deductions
- Charitable donations
- Medical expenses
Other major changes to note:
- A $10,000 cap on state and local deductions. In the past, you could deduct your local tax payments on your federal return. Now, there’s a cap on your state and local tax (SALT) and these deductions are restricted to a maximum of $10,000. So, for retired filers whose SALT is less than $10,000, there’s no change stemming from the cap. On the flip side, for retirees in high-tax states — like California, New York, Connecticut and New Jersey — the SALT cap could have huge repercussions for those whose property taxes are over $10,000 a year.
- Lower tax rates in most brackets. Under the new law, tax rates are lowered across the board, and you’ll most likely pay less in taxes. For single filers who make up to $9,525 and married filers who make up to $19,050, the rate stays the same. But for everyone else, rates are falling. A married couple, for example, whose income is $250,000 (minus deductions), had a tax rate of up to 33% in 2017. Under the new law, their highest tax rate is 24%. One important reminder for retirees: Make sure you’re getting enough taxes withheld from any pension or annuity payments, or you may get hit with a big bill plus an estimated tax penalty.
- Bigger deductions for healthcare expenses. Previously, filers could itemize and deduct healthcare expenses totaling more than 10% of adjusted gross income (AGI). Under the new tax law, healthcare costs are now deductible if they exceed 7.5% of your AGI, according to the IRS. If you have high healthcare expenses, you’re likely to be affected in a positive way.
As always, discussing your unique situation with a knowledgeable financial advisor is your best approach.
Money matters on your mind?
Regardless of how the new legislation will impact you, you may already be considering ways to improve your cash flow during retirement.
A reverse mortgage loan can be a smart option to consider, because it lets you tap into the equity you’ve built up in your home, while you continue to own it and live there. And because loan proceeds are generally not considered income, the funds you receive are income-tax-free.†
Many older homeowners use a federally insured* Home Equity Conversion Mortgage (HECM), the most popular type of reverse mortgage, to supplement their monthly income by taking their proceeds as a steady stream of funds. With a HECM, you can also choose to take your funds as a lump sum, line of credit, or a combination of these options.** And if your situation changes in the future, you can even change how you take your remaining funds — giving you a great level of flexibility that’s not available in other type of home equity-based loans.
HECM reverse mortgages are exclusively available to homeowners and homebuyers age 62 and older.
If you’re still paying off your mortgage, you may still qualify. In fact, many older homeowners refinance their remaining mortgage balance — along with other debts such as credit cards and auto loans — into a reverse mortgage, to reduce their monthly bills. The advantage of doing this is that reverse mortgages have a flexible repayment feature: Monthly mortgage payments are not required, so you can pay as much or as little as you like each month, or defer repayment until you sell the home to repay the loan. As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, and maintenance
There’s also a reverse mortgage called Equity Elite that’s available in many states to homeowners as young as 60, exclusively through Reverse Mortgage Funding LLC (RMF) as the lender.††
By understanding the different financial options available to you, you can feel more confident planning your future — and actually enjoying your retirement. Find out how Reverse Mortgage Funding can help. Call (888) 277-1567 to set up a convenient phone appointment with one of our trusted loan specialists.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders. We are dedicated to helping older Americans retire more freely, in the comfort of their own homes. As a result of our commitment to providing an extraordinary and positive customer experience, we have earned a 98% customer satisfaction rating; a 5-star / Excellent score on Trustpilot; 4.8 out of 5 stars on LendingTree; and an A+ rating with the Better Business Bureau. Call (888) 277-1567 to speak with a licensed reverse mortgage specialist to learn about our retirement financing products and solutions.
SEE WHAT FUNDS YOU MAY HAVE AVAILABLE
If you have equity in your home and believe you meet the eligibility requirements, a HECM may be the option that could help you retire smart.
*This material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency.
†Not tax advice. Consult a tax professional.
**Borrowers who elect a fixed rate loan will receive a single disbursement lump sum payment. Other payment options are available only for adjustable rate mortgages.
††Not applicable in all states; some states may impose a higher age requirement. Visit www.reversefunding.com/equity-elite for details.
This information is intended for those who are interested in financial education. This information is provided for convenience only, and RMF make no warranties concerning the accuracy or completeness of any of the information. Information is subject to change without notice, and RMF is under no obligation to provide updated information. Materials or statements made by a third party and located or posted on the Site are those of the third party and do not necessarily reflect the official policy or position of RMF. This is not financial, tax, compliance or legal advice and should not be taken or relied upon as such. Each individual should consult with his/her financial, tax, or legal professional. All mortgage origination services are provided by Reverse Mortgage Funding LLC, a state licensed mortgage lender, which is licensed or otherwise exempt from state licensing in the states in which it originates mortgage loans.
Equity Elite Reverse Mortgage (“Equity Elite”) is Reverse Mortgage Funding LLC’s proprietary loan program, and it is not affiliated with the Home Equity Conversion Mortgage (HECM) loan program, which is insured by FHA. Equity Elite is available to qualified borrowers who also may be eligible for HUD, FHA’s HECM program or are seeking loan proceeds that are higher than HUD, FHA’s HECM program limit. Equity Elite currently is available only for eligible properties in select states. Please contact your loan originator to see if it is currently available in your state.
Upon a maturity event, any non-borrowing individuals with an ownership interest in the property, including non-borrowing spouses, will have 90 days to purchase the property from the estate or, if the non-borrower inherits the property, pay the loan in full using any sources of funds available to them. Any non-borrowing individual, including a non-borrowing spouse, should have a plan to pay off an Equity Elite reverse mortgage upon the borrower’s death or any other maturity event. If the non-borrower is unwilling or unable to purchase the property or pay the loan in full, there is no protection for the non-borrower (including a non-borrower spouse) to maintain an interest in the home or to continue residing in the home past the maturity event and the non-borrower may be evicted upon foreclosure. The FHA HECM program has protections in place for certain non-borrowing parties, so a reverse mortgage applicant with certain non-borrowing parties should strongly consider a FHA-insured HECM loan (see HECM guidelines or ask an RMF representative for details). Under the Equity Elite reverse mortgage loan program, a maturity and/or default event occurs when the last surviving borrower no longer lives in the home as his or her primary residence for at least 12 months, the property charges (including taxes, insurance, or any other property charges) are not paid, required repairs are not completed or the property is not maintained, or any other maturity and/or default event, as specified in the Security Instrument, occurs.