Ah, November, a time dedicated to gratitude, harvest, and planning ahead. Since the best gift is knowledge, I thought it would be a best practice to outline a few changes next year will bring to us financially. As you know, the One Big Beautiful Bill Act (“The Big Beautiful Bill”) was signed into law on July 4 of this year. Our previous tax law was set to expire this year, and this act makes several permanent and temporary changes to tax policy for all Americans.
The annual tax exclusion remains at $19,000 per recipient in 2026, and that figure will be indexed for inflation in years to come. This is the amount any one person can give to another without tapping into their lifetime exclusion amount. For example, if I gifted you $25,000, then $6,000 would either be taxable or need to be applied against the new, federal estate and gift tax exclusion of $15 million per individual ($30 million per married couple).
So, what if you are being gifted $100,000 to buy a new home? Well, then $19,000 could be considered a gift, and you would need to either claim the rest as income (and thus pay taxes on it), or you could say the other $81,000 is really against your $15 million limit. Thus, over the rest of your lifetime, you could then inherit $14.919 million over the rest of your life.
The biggest adjustment for housing, in my opinion, is raising the limit of State and Local Taxes (SALT) deduction to $40,000 through 2029. Previously rolled down to $10,000 from the last tax law change implemented in 2018, this new cap increases one percent annually, but then rolls back down to $10,000 in 2030. Property taxes, DMV fees, and even the income taxes the State of California charges you can be applied against this deduction.
The interest one pays on your mortgage is still capped to a $750,000 loan amount, though now mortgage insurance can be included as well. For example, if your loan amount was $1 million, then you could deduct 75 percent of the interest. However, if your loan was $500,000, then you could deduct BOTH the interest and mortgage insurance (if applicable).
While these items above only touch parts of the bill, the main thing I see impacting our community from the housing standpoint is with regards to mortgage insurance and SALT changes. The first adjustment gives more financial incentive for homebuyers in lower price points. Putting 5 percent down on that $800,000 condo just became a whole lot more attractive. This could make it more financially feasible for those looking to break into the market over the next few years. Knowledge is a gift, and I hope this helps gives your insight of how you can be most successful in your own homeownership journey.
Austin Lampson is a licensed mortgage professional and branch manager of Origin Point Mortgage. She has spent the last quarter-century helping her clients balance math and emotion to achieve their financial goals. Reach Austin at (805) 869-7100, austin@austinlampson.com, or visit austinlampson.com.
