January 13, 2026
It is a new year and that means that tax-time for 2025 is right around the corner. There were many changes to the tax laws in the last year, and we wanted to focus upon the tax changes that affect real estate ownership, most of which were positive. First, the local and state (SALT) tax deduction cap was raised from $10,000 to 40,000 through 2029. This means that owners in high-value/property tax states are more likely to itemize deductions – as well as high-income earners paying significant state and/or local income taxes. The ability to deduct mortgage insurance was also reinstated, though this benefit is continued to be capped for high-income individuals.
On the negative side, energy efficiency credits for home improvements and clean energy will not be available for improvements placed in service after December 31, 2025. Under the “no-change” category includes two provisions — there is still a limit of $750,000 in mortgage debt which can be deducted and the capital gains exclusion for selling a primary residence remains at $250,000 for single filers and $500,000 for married couples. These are considered negative because of the recent rise in values of real estate have brought these limits into play for more owners. There have been proposals introduced which would raise the capital gains exclusions one means of encouraging more long-time owners to list their properties without the risk of paying capital gains on the sale.
On the economic front, last week we had the first jobs report released in some time which was not delayed. The releases of the recent previous reports were either delayed or incomplete because of the government shutdown. Therefore, the December data took on increased importance, not only because of last month’s data, but also the expectation of more pronounced adjustments in the previous two months of reports. For December, the economy created just 50,000 jobs and yet the unemployment rate fell slightly to 4.4% from 4.5% in November. The previous two months of job creation were revised downward by 76,000 jobs. Also, wages grew 0.3% on the monthly basis and 3.8% year-over-year. All in all, this report was seen as evidence of continued weakness in the labor sector, which should contribute to lower mortgage rates.
Source: Origination Pro
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