The Tax Cuts and Jobs Act (TCJA) and Bipartisan Budget Act of 2018 has caused the biggest change in the American tax system in 30 years.
9 Personal Deductions and Credits Eliminated or Decreased
Many popular deductions claimed on personal income tax returns have been eliminated or decreased for the 2018 tax filing season.
1. Personal Exemption: You will no longer be able to take a deduction for yourself, the taxpayer, or your dependents.
2. Alimony: If your divorce is finalized or you modify your alimony agreement on or after Jan. 1, 2019, then alimony payments cannot be deducted from the payer's taxable income for 2019. If you are the one receiving alimony, it should not be reported as part of your taxable income.
3. Moving Expenses: Unless you are in the military*, you may no longer deduct the cost of moving household goods and personal items or travel related to your move.
4. Unreimbursed Employee Expenses: Expenses related to employment can no longer be deducted. These would include uniforms, professional dues, work computer, job hunting expenses, licenses, etc.
5. Miscellaneous Itemized Deductions: Also gone is the unreimbursed qualified employee education expenses deduction. Other miscellaneous itemized deductions include costs related to tax preparation services, investment fees, professional dues and a long list of other approved items.
6. Home Mortgage Interest: You can still deduct interest on mortgage indebtedness– up to $750,000 for mortgages taken out after Dec. 15, 2017. For older mortgages, the limit is still $1 million.
7. Home Equity Loan Interest: Interest on debt that is related to the purchase, construction, or significant improvement to your residence is deductible.
8. Sales and Local Tax: The amount you can deduct for any combination of state and local taxes – including income, property and sales tax - is capped at $10,000.
9. Medical and Dental Expenses: Beginning Jan. 1, 2019, you may deduct any amount of unreimbursed medical and dental expense
4 Personal Deductions and Credits Expanded
Likewise, some deductions on the personal income tax returns have been expanded for the 2018 tax filing season.
1. The Standard Deduction: Standard deduction by filing status, for 2018-2024: Single, $12,000, Married, filing separately: $12,000, Married, filing jointly: $24,000, Head of Household: $18,000.
2. Child Tax Credit: Child tax credit, for each qualifying child under 17, has doubled to $2,000 and is now refundable. The refundable portion is equal to 15% of your earned income over $2,500, up to $1,400.
3. 529 Savings Plan: Under the new TCJA, you can use your plan to cover up to $10,000 per year of qualifying expenses for any school and any grade from kindergarten through 12th as well as colleges and universities.
4. $500 Credit for Dependents Age 17-24: If your child does not qualify for the Child Tax Credit, CTC, because they are over 17, they may still be eligible for a $500 credit under the new TCJA.