BUFFALO, N.Y. (WKBW) - 2018 kicks off a new tax code in the United States and there's one big change that will affect many WNY homeowners and it's a change many might not know about.
Deductions can no longer be taken for interest paid on home equity loans or lines of credit. Many homeowners borrow money against the value of their home in order to consolidate things like credit card debt or pay for big expenses like cars, boats or home repairs.
Homeowners used ot be able to deduct all the interest paid on these lines of credit when filing their taxes, but that is going away in 2018.
"At this point, I think a lot of people are still in the dark about exactly what this means for them," Anthony Ogorek, CEO of Ogorek Wealth Management in Williamsville, said. "It's incumbent upon people who look at purchasing homes to look at it with fresh eyes and not look at it exclusively as something which is going to be tax driven but something which needs to make economic sense for them also."
Ogorek says every individual case is different and could be impacted differently for the new code, but this serves as a reminder to all homeowners to take the time to evaluate how their managing their debt.
"Looking at the whole array of that and saying: Do we have a coherent strategy to manage interest rates, try and manage tax deductibility to the extent we can and try to get that debt down?," he explained.
Susie Lenahan is a real estate agent for MJ Peterson Real Estate in Buffalo. Clients have been reaching out to her about the changes to the tax code to try and figure out what exactly is happening.
"They're concerned," she said. "They don't know about it. They don't understand all of it. I'll be honest, I don't think anybody understands all of it. It's 2,000 pages of changes."
Lenahan says a traditional mortgage might be the best option going forward, since homeowners will still be able to take tax deductions on mortgage interest on debt up to $750,000.
But, since the tax code is so new, there are still a lot of unknowns. Lenahan and Ogorek both say it's going to take time to find out what kind of impact this might have on WNY families.
"We don't fully know what the ramifications are," Lenahan said. "When people start doing their taxes for next year, following the 2018 year, is really when things are going to happen."
WNY real estate shouldn't be hurt too bad by the changes, according to Lenahan, since the market is doing so well and the average home in the area doesn't reach $750,000 in value. She thinks places in downstate New York might see more of a negative impact.
Ogorek and Lenahan both recommend homeowners meet with a professional to go over the tax code and learn how it impacts their specific financial situtation.