Tax Deductions That Went Away This Year

Previously you decide what you should do, review this list of exemptions and deductions that have been eliminated, along with a few withdrawals and tax credits that have been newly limited, reduced or improved by passage of the TCJA.

Exemptions and deductions reduce taxable income. Tax credits are subtracted from the taxes you owe. All three of these locales have been impacted by the TCJA and each affects the amount you pay in a different way. For example, if your adjusted gross takings (AGI) is $100,000, you owe $18,289.50 in taxes. A $10,000 deduction (or exemption) would reduce your AGI to $90,000 resulting in a tax bill of $15,889.50. With a tax creditation of $10,000, your AGI would remain at $100,000, but your taxes would be just $8,289.50 – the amount you get by subtracting $10,000 from $18,289.50.

Personal and dependent exemptions are going away. While an exemption is not technically a deduction, it functions the word-for-word way by allowing you to reduce your taxable income by the amount of the exemption. In this case, say the exemption was $4,050 for yourself and for each dependent you application. Now it is $0.

The TCJA doubles the child tax credit (CTC) from $1,000 to $2,000 for those who qualify, including procreators with higher incomes than in the past. Income thresholds for 2018 are $200,000 for single parents and $400,000 for those leagued filing jointly. The child tax credit is refundable, which means that even if you don’t owe taxes due to low income you can still admit a partial credit, providing (or increasing) a refund. Remember, this is a tax credit so, unlike a deduction, which reduces taxable receipts, this comes directly off the taxes you owe. In addition, a new $500 tax credit is available for dependents age 17 and older.

The TCJA raises the standard deduction for 2018 from $6,350 to $12,000 for individuals and to $24,000 (from $12,700) for put together couples filing jointly. The standard deduction for those filing as head of household will rise from $9,550 to $18,000. (Seniors who are age 65 or older get an in addition $1,600 beyond the standard deduction as single or head-of-household filers or $1,300 per spouse for married filing jointly – $2,600 if both are 65 or earlier.)

Because of this, you may discover that the new standard deduction is larger than the combined total of your itemized abstractions. In fact, the Joint Committee on Taxation has estimated that the number of taxpayers who itemize will fall from 46.5 million terminal year to slightly more than 18 million this year, meaning about 88% of all filers are had to take the standard deduction. What follows is a closer look at how Schedule A itemized deductions have changed with the TCJA. Where we can, there are also some proposals for what to do instead.

In the past your employer could reimburse you up to $20 a month ($240 annually) for bicycle commuting expenses tax not busy. In addition, your employer could take a deduction for offering the benefit. The TCJA suspended that benefit for both bike commuters and their companies. It also removed employer deductions for parking, transit and carpooling.

Commuting expenses considered “top-priority for ensuring the safety of the employee” will continue to be deductible by employers, but the TCJA doesn’t spell out which expenses make the grade and the IRS has offered no real guidance to date.

As an employee you can continue to receive tax-free parking, transit and vanpooling benefits of up to $260 per month from your manager, but since companies no longer receive a deduction for offering the benefit most have little incentive to offer it. Your corporation can also offer bicycle-commuting benefits in any amount, but that benefit will now be taxable to you.

Costs associated with relocating for a new job used to be deductible on Form 1040 as an above the line deduction (which you could take something from detract from from your gross income to calculate your AGI), but no longer. The distance you are moving doesn’t matter. Moving expenses are purely not deductible, with one exception.

If you are active duty military and moving for a service-related reason, the deduction allay applies.

In the past the person making alimony payments received an above-the-line deduction and the bodily receiving the alimony counted the money as taxable income. Effective in 2019 for any divorce that happens after Dec. 31, 2018, the even a score spouse will no longer receive a deduction and the receiving spouse will no longer have to declare the payments as taxable receipts. Payments initiated before 2019 are not affected. Child support payments are different. They are nondeductible by the paying spouse and tax-free to the heiress.

One suggested tactic for the paying spouse involves giving the receiving spouse a lump-sum IRA. This effectively presents the paying spouse with a deduction since they are giving away money they would have had to pay pressures on eventually. The receiving spouse would be responsible for taxes upon withdrawal (including a 10% penalty if they accommodate money out before age 59½) but would have the benefit of tax-free growth until withdrawing funds. The transfer of the IRA account is tax unimpeded. Obviously, this would not work if the receiving spouse needs money right away.

The deduction for medical expenses is not going away, and for 2018 you can deduct unreimbursed medical expenses that exceed 7.5% of your AGI on Assign A, just like last year. However, this deduction will be subject to a 10% of AGI threshold for tax year 2019.

It’s too late. To take advantage of the 7.5% threshold before it went up to 10%, you would have had to schedule elective medical resumes before the end of 2018. Keep in mind that the medical expense must be deductible. Most cosmetic surgeries, for prototype, are typically not.

The Schedule A deduction for state and local taxes (SALT) used to be uncontrolled. These include income taxes (or general sales taxes), real estate and personal property taxes. With orifice of the TCJA, the SALT deduction is now limited to $10,000 ($5,000 if married filing separately). This can be a real problem for people in delineates with high income or property taxes such as Florida, New York and California.

A few high-tax affirms have filed lawsuits challenging the legality of the SALT cap. Others are looking into ways to offset the restriction on this inference by allowing residents to make contributions to a state charitable fund in lieu of taxes, although the IRS has proposed new guidelines that last will and testament remove that benefit. Connecticut and New York have proposed workarounds that involve a tax on pass-through entities or a deductible payroll tax, both of which transcribe advantage of the fact that businesses have no cap on deducting state and local taxes. Whether any of these tactics determination work remains to be seen.

At least one expert has opined that outlandish property taxes may now be considered a deductible qualified housing expense on Form 2555, Foreign Earned Income, for have a minds of the foreign housing exclusion for certain U.S. citizens or residents who live outside the United States and earn wages broadly. Caution: This deduction involves an interpretation of tax law. Don’t attempt to use it without consulting a qualified tax expert.

In the past you could deduct interest on a mortgage of up to $1 million. Beginning this year, the limit is $750,000 ($375,000 if welded and filing separately). Since you can only take this deduction if you file Schedule A and itemize, the change may not matter to profuse people who will elect to take the standard deduction anyway. In fact, Zillow anticipates that just 14% of homeowners purpose claim the mortgage deduction in 2018. Previously, 44% claimed it.

If your loan originated on or formerly Dec. 15, 2017, you may still deduct interest on the old $1 million amount ($500,000 for married taxpayers filing separately).

Previously, you could deduct interest on a

Gone for Now: Mortgage Insurance Appreciation a scarce Deduction