The 2018 tax filing season begins in late January 2019.
The passage of the Tax Cuts and Jobs Act means some stark changes for tax filers and the deductions they can take.
One of the most notable changes is the increase in standard deductions for individuals and married households.
Tax filing season is only a couple months away. With the passage of President Donald Trump’s Tax Cuts and Jobs Act last year, filling out your tax forms might require a different strategy than what you’ve used in previous years. Here’s a breakdown of some of the more notable changes you need to consider for the 2018 tax filing season, including multiple deductions that are now kaput.
Increase to the Standard Deduction
Probably the most useful change for individuals and families is the increase in the standard deduction. The amount has almost doubled to $12,200 for individuals and $24,400 for families. These increases are supposed to increase the average household income by $4,000.
No More Personal Exemptions
Although increasing the standard deduction might be a good thing, you can no longer claim a personal exemption for yourself, your spouse or your dependents. This means you can no longer reduce your taxable income by $4,050 for each eligible member of your household.
State and Local Tax Caps
Known as SALT, the new tax law limits this tax deduction to $10,000, whereas previously it was unlimited. This could be a big drawback for people living in California, New York, South Carolina and other places where people pay high property taxes.
Reduced Mortgage Interest Deduction
Homeowners will only be able to deduct up to $750,000 worth of interest from qualified residence loans, whereas before it was up to $1 million. This could pose another problem for residents living in states with high home prices that require larger mortgages, like New York and California. Furthermore, you will also be unable to deduct the interest from home equity loans. Even currently existing home equity loans will not be grandfathered in, according to U.S. News.
No More Job Expenses Claims
You could previously claim unreimbursed job-related purchases so long as they were more than 2 percent of your adjustable gross income. Unfortunately for strapped employees, that deduction will be eliminated for 2018’s taxes.
No More Moving Expense Claims
Transients could’ve deducted moving expenses from their taxes provided they met certain criteria, but the new tax law eliminates this, with the exception of military service members moving to new duty stations.
No More Natural Disaster Deductions
It’s been an intense several years for residents dealing with natural disasters; the California wildfires are just the most recent example. Prior to the new tax law, victims of circumstance could deduct at least half of the expenses they incurred. However, under the new tax law, you must live in a “presidentially designated disaster area” to be eligible for the deduction.
Other Miscellaneous Deductions That Have Been Eliminated
The new tax law will also eliminate multiple deductions that might dent your tax refund, or increase your tax bill:
Tax preparation fees
Parking and transit reimbursement
Reduction of charitable donations if used to acquire college athletic tickets
Convenience fees for ATM use
Rread more about how Trump’s tax plan could save your business 20 percent.