California 2018 Tax Reforms – Specific Changes That Affect Real Estate
Here’s a helpful chart to see how the changes in the tax policy impacts Torrance and all California property owners.
| PREVIOUS LAW | 2018 LAW | |
| MORTGAGE INTEREST DEDUCTION | Capped at $1M | Capped at $750,000 |
| STATE AND LOCAL TAX DEDUCTION | Unlimited | Deduction capped at $10,000 (income, sales and property combined) |
| CAPITAL GAINS EXEMPTION ON SALE OF PRIMARY RESIDENCE | Exclusion of up to $250,000 ($500,000 if married) of gain realized on sale or exchange of principal residence if lived in for 2 of the last 5 years |
No change |
| 1031 LIKE-KIND EXCHANGES | Applied to all classes of property (e.g. personal and real) | Limits non-recognition of gain to real property |
| PERSONAL DEDUCTION | Allowed | Eliminated |
| STANDARD DEDUCTION | $6,350 individual and $12,7000 if married | $12,000 individual and $24,000 if married |
| MID FOR SECOND HOMES | Capped at $750,000 | |
| HOME EQUITY LOAN DEDUCTION | Capped at $100,000 | Not deductible unless the proceeds are used to substantially improve the property |
| MOVING EXPENSE EXCLUSION AND DEDUCTION | Incurred in connection with change in work place | Eliminated except for members of armed forces on active duty that move pursuant to military orders |
| CHILD TAX CREDIT | $1,000 for each child | $2,000 for each child |
| DEDUCTION FOR QUALIFIED BUSINESS INCOME OF PASS-THROUGH ENTITIES INCLUDING INDEPENDENT CONTRACTORS | None | 20% deduction of taxable income phased out above $157,000 ($315,000 if married) for brokerage services |
| DEPRECIATION RECOVER PERIOD FOR REAL PROPERTY (RESIDENTIAL RENTAL) | Recover period is 27.5 years | No change |
| DEPRECIATION RECOVER PERIOD FOR REAL PROPERTY (NONRESIDENTIAL) | Recover period is 39 years | No change |
| DEPRECIATION RECOVER PERIOD FOR REAL PROPERTY (LEASEHOLD IMPROVEMENTS) | Recover period is 15 years | No change |
