The Lost Tax Deductions Under New Law
Over the last year, you’ve surely read or heard that many long-standing deductions go away.
In this short blog post, I’m going to review these lost tax deductions.
Knowing which deductions you no longer get to take should make preparing your tax return easier.
In past, taxpayer potentially received a roughly $4,000 deduction for each person in the family. (High income taxpayers lost some or all of this by the way.)
For 2018, the personal exemptions go way. No more. So count this as the first and one of the biggest lost tax deductions under the new law.
Like personal exemptions, moving expenses no longer count as deductions. Sorry.
Home Mortgage Interest
The new tax law limits the mortgage interest deduction for new mortgages. You only get to deduct the interest on the first $750,000 of your loan.
Note: Old larger mortgages probably get grandfathered, so interest on those loans probably can still be deducted. But you’ll want to understand the gritty details. (See this blog post for more information:New Mortgage Interest Deduction Rules.)
Home Equity Loan Interest
A related potential lost tax deduction? Unless a home equity loan counts as a mortgage (because you used the home equity loan money to buy, refinance or improve your home), the new tax law says you don’t get to deduct interest on a home equity loan.
State and Local Income, Property and Sales Taxes
The new tax law limits the itemized deduction a taxpayer gets for state and local taxes to no more than $10,000.
These state taxes include property taxes and then either state income taxes or state sales taxes.
Anybody living in a state with income taxes or high property taxes—probably the so-called blue states—will very likely experience this lost tax deduction.
Casualty Losses Outside Presidential Declared Disasters
Casualty losses including theft losses no longer work as deductions—except if the casualty loss occurs in a presidentially declared disaster area for something like a storm, fire or earthquake.
Note: The casualty loss math often makes a deduction problematic even if you can claim the deduction. You ignore the first $100 of any casualty loss. (That doesn’t count.) And then you only get to deduct the remaining casualty loss or losses (the amounts leftover after the $100 write-off) to the extent they in total exceed 10% of your adjusted gross income.
To simplify, if your adjusted gross income equals $100,000 and you experience one “presidentially declared” casualty event, only the part of a casualty loss in excess of $10,100 becomes an itemized deduction.
Miscellaneous Itemized Deductions in Excess of 2% of Adjusted Gross Income
In the past, you got to take a handful of miscellaneous itemized deductions to the extent they together totaled and exceed 2% of your adjusted gross income: un-reimbursed employee expenses, tax preparation fees, investment expenses and so on.
But no more. These deductions have also been eliminated.
Three Final Comments about Lost Tax Deductions
All the lost tax deductions sound bad, but you won’t know whether you pay more tax until you look at the new tax law’s other effects. For one thing, for the next few years at least, individuals calculate their income taxes using a schedule of lower tax rates.
As another example, business owners get a series of compensating tax breaks that should more than make up for any lost itemized deductions. (The big new small business tax deduction is the Section 199A qualified business income deduction. This deduction essentially says business owners don’t have to pay income taxes on the last 20 percent of the business income they earn.)
Third, finally, probably many middle-class households won’t actually be “hurt” by the lost tax deductions. Why? Many won’t itemize any longer. Rather, they will take the new greatly enlarged standard deductions: $12,000 for a single taxpayer and $24,000 for a married couple.
The post The Lost Tax Deductions Under New Law appeared first on forex deposit bonus 2018 Business.