The new tax reform law can significantly affect the income tax return of individual taxpayers in 2018. Some of the many changes to be expected are lower tax rates, higher standard deductions, and higher child tax credits for families. These tax breaks, however, will result in the elimination of many deductions that have been used for many years by taxpayers in order to lessen their tax bills. The Tax Cuts and Jobs Act of 2017 will help everyone save tax but also has to face the changes in their deductions for the year 2018. The following 10 deductions are just some of the most important provisions you will no longer see this tax year.
1. Home Equity Loan Interest. Starting 2018, the deduction for interest on home equity loans will no longer be considered a deductible. However, mortgage interest on purchase loans, according to the tax reform is still deductible up to $750, 000. The difference between the two is that existing home equity loans will have no grandfathering provision - the opposite of purchase loans. So if you think deductions are very important for you, take a closer look and make sure to pay your loans as soon as possible.
2. Personal Exemptions. This is considered to be the biggest change the tax act made. It removed personal exemptions that generally helped taxpayers reduce their taxable income by $4, 050 per individual. Lawmakers first hand argue about this saying the personal exemption merged into the rise of standard deduction isn’t enough to compensate the elimination of personal exemptions for most people.
3. Unlimited State and Local Tax Deductions. The SALT deductions or the state and local taxes starting 2018 will be limited at $10, 000. For most taxpayers, especially those who live in New York and California who pays high property taxes every year, changing this provision is a big deal. To offset the lost deduction but still retain high-income taxpayers, some states consider using strategies to make it happen.
4. Moving Expenses. If you’re planning to move to a new place this year you might want to know about this change. The new law will no longer allow taxpayers who deduct moving expenses like they did for 2017. The only way to have your expenses deducted is if caused by a change of work and it has to be 50 miles further from where your old house and your old job was. The moving expense deduction was known for having to itemize deduction to get it, unfortunately, it’s no longer be around starting 2018.
5. Miscellaneous itemized deductions. Among the many miscellaneous itemized deductions that are no longer allowed in the new law is the unreimbursed work expenses. Along with it is tax preparation services related costs, investment fees, and many other approved items. The only way for these miscellaneous expenses to be deducted is if exceeds 2% of a taxpayer’s adjusted gross income.
6. Alimony Deduction. The previous allow couples to set up alimony agreements that can make the person who’s paying, deduct that amount from their federal taxes. However, the new law will remove the deduction or that certain option for any divorce happening after the 31st of December 2018.
7. Casualty and Theft Losses. In the past, casualty losses qualify as itemized deductions as long as it exceeds $100 plus 10% of the individual’s adjusted gross income. Others events including natural disasters, fires, robberies and many qualifying occurrences were under the old law as well. But starting 2019, the deduction only qualifies for disasters where a presidential disaster area declaration was made.
8. Expenses Incurred For Jobs. Expenses incurred on a certain job like license and regulatory fees qualified as an itemized deduction in the past as long as it exceeds 2% of your adjusted gross income. But today, these costs are no longer deductible which means its best to have your employer pay them on your behalf.
9. Subsidized Parking and Transit Reimbursement. The old law allows employees to receive $255 per month from their employers to subsidize parking costs or transit passes without including those benefits in their income and companies could just deduct it. The new law will remove the corporate deduction for that cost which means businesses no longer have to offer these programs to employees.
10. Deductions From Donations Made to Colleges. If you’re one of those who loves to donate to colleges in exchange for athletic even seats and deduct the full amount in your tax return, you need to know that the new law will no longer allow that. You will have to lessen your deductions by the value of those tickets.
