Three recent tax law changes impact homeowners and home-based businesses. They may affect your federal income taxes this year.

The state and local taxes deduction now has a $10,000 yearly limit. You can now deduct only up to $10,000 of some combination of (a) state and local property taxes or (b) state and local income taxes or sales taxes, annually.

If you have itemized for years and are continuing to itemize this year, this $10,000 cap may be annoying.

California has a relatively high-income tax rate, and many taxpayers received some tax relief by being able to deduct all of their state income tax bill.

With the new $10,000 combined limit, many higher-income taxpayers will not be able to deduct all of their California income taxes.

The interest deduction on home equity loans is not quite gone.

The Tax Cuts & Jobs Act seemed to suspend it entirely until 2026. But this winter, the IRS issued guidance noting that the deduction still applies if a home equity loan is arranged to help a taxpayer “buy, build or substantially improve” the involved house.

So, you may still deduct interest on a home equity loan if your receipts show that the borrowed amount is used for a new 30-year roof, a kitchen remodel or similar upgrades.

Keep in mind that the Tax Cuts & Jobs Act lowered the limit on the total home loan amount eligible for the interest deduction each year – it is now set at $750,000.

That cap applies to the combined home loans a taxpayer takes out for both a primary and secondary residence.

Many Californians are running into this limit. The higher price of homes has forced buyers into larger mortgages that may exceed this limit.

The home office deduction is gone unless you are self-employed.

Before 2018, if you dedicated an area of your home solely to business use and defined it as your principal place of business to the IRS, you could claim a home office deduction on Schedule A.

This was considered a miscellaneous itemized deduction.

Unfortunately, the Tax Cuts & Jobs Act did away with miscellaneous itemized deductions.

If you work for yourself, though, you can still claim the home office deduction using Schedule C, the form used to report income or loss from a business activity or a profession.

Are you strategizing to maximize your 2018 federal tax savings?

Are you looking for ways to legally reduce your federal and state tax obligations? Talk to a financial professional to gain insight and plan for this year and the years ahead.

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Tom and John Mills are registered investment advisers and certified financial planners. Reach them at 254-0155, MillsWealth.com. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group (SWAG), a registered investment adviser.