Tax Season is Here Again
It’s February – only two months left to file your 2018 taxes. The Tax Cuts and Jobs Act of 2017 introduced many new regulations that may affect you. Take a deep breath, relax, and read about some of the ways tax deductions and credits have changed.
This year, there have been many changes to tax deductions. For many households, the biggest change involves itemized deductions. Here are several deductions you can no longer take:
Children and Other Dependents.
For 2018, the personal exemption has been eliminated. You can no longer take a $4,050 deduction for yourself or any dependents. An increase in the standard deduction and child tax credit may help offset the change, but the child tax credit is not available to all families.
State and Local Tax Deductions – Including Property Taxes.
These deductions have been capped at a total of $10,000. This may negatively affect those in states with high property taxes, however, some states have been researching options that may help with the loss of this deduction.
Mortgage Interest Deductions.
These changes will not affect existing mortgages obtained prior to December 31, 2017. For new mortgages, taxpayers may only deduct interest on up to $750,000 of qualified residence loans.
Home Equity Loan Interest (HELOCs).
The new law disallows deducting home equity loan interest when used for reasons other than home improvement. In addition, the total dollar limit eligible for deduction is inclusive of your current home mortgage. The combined total eligible for deductions is $750,000.
Unreimbursed Job Expenses.
Prior to 2018, deductions existed for money paid out-of-pocket forsupplies, education, or other work-related expenses that were not reimbursed by your company. That is no longer the case under the new rules.
Various Other Itemized Deductions.
In previous years, you may have deducted expenses such as – the cost of tax preparation services, safe deposit box rentals, investment fees, IRA custodian fees, and other items. Many are no longer deductible. However, check with your tax professional to be certain for your personal situation.
Relocating just became less attractive from a tax perspective.The new law eliminates this deduction, which in the past could be claimed even if you didn’t itemize your other deductions. Some taxpayers are exempt from this change, such as members of the military on active duty.
Parking and Transit Reimbursements.
In the 2017 tax year, employees could receive up to $255 per month from their employer towards parking and transit costs, and employers could deduct these reimbursements. Now employers can no longer deduct these reimbursements. More employers are looking to eliminate these reimbursements to their employees.
Donations Related to Athletic Event Tickets.
If you donated to a college and received tickets to an athletic event, you are now required to reduce the amount of your charitable donation deduction by the value of any tickets you receive to attend an athletic event. Surprisingly, this reduction for the value of tickets wasn’t required in prior years.
In order to offset these new exclusions, the standard deduction nearly doubled for 2018. Single filers may be able to deduct $12,000. Heads of Household may be eligible for $18,000. Married couples filing jointly may be eligible for $24,000. In addition, those over age 65 are eligible for a further deduction. Married filing jointly may deduct an additional $1,300 for each individual over 65. Single and Heads of Household may deduct an additional $1,600.
To compensate for the elimination of dependent exemptions, the new law increased the Child Tax Credit to $2,000 for each qualifying child under age 17. This amount is double what it was in previous years. In addition, the income limits for eligibility have increased. For 2018, single filers income begins phasing out at $200,000 of modified gross income – up from $75,000 in 2017. For married couples filing jointly, income phase out begins at $400,000 – up from $110,000. Additionally, if you have dependent children age 17 or older and/or support parents or other relatives, you may be eligible for a tax credit of $500 for each qualifying person.
This article is not intended to be a substitute for specific individualized tax advice. We recommend discussing the tax changes with your financial and qualified tax professionals about how they may affect you. This article does not explain all of the changes introduced by tax reform nor is the information provided intended to be tax advice. You can find additional information about tax law changes on the IRS website. For Tax Season: Bogart Wealth is neither a law firm nor a certified public accounting firm and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Bogart Wealth’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.