There are a number of provisions in the Tax Cuts and Jobs Act that may lower your tax liability for 2018, including lower tax rates, a doubling of the child tax credit for children under 17, and a new credit for nonchild dependents such as children over 17 and elderly parents. However, some deductions to which you may have grown accustomed have gone away. The Pennsylvania Institute of Certified Public Accountants (PICPA) provides this list of deductions that will be no longer available or have been reduced for 2018 and future years.
- Personal Exemptions. The personal exemption is going away. Previously, a personal exemption of $4,050 per person was available for a taxpayer, spouse, and eligible dependents.
- State and Local Taxes. State and local taxes paid are still deductible for those who itemize. However, state and local income and property taxes are now capped at $10,000.
- Mortgage Interest. The mortgage interest deduction is unchanged for current homeowners. The deduction for new home purchases is capped at $750,000 of indebtedness. In addition, home equity loan interest is no longer deductible.
- Moving Expenses. Moving expenses incurred by taxpayers who move for work are no longer deductible. There may be some exceptions for members of the military.
- Unreimbursed Job Expenses. Unreimbursed job expenses incurred by employees – such as for job-related travel, small tools, uniforms, and licenses – are no longer deductible.
- Subsidized Parking and Transit Reimbursements. Parking and transit reimbursements were previously allowable up to $255 per month. Employers were permitted to take a deduction on their business tax returns, and employees did not need to include these reimbursements as income. These payments are no longer deductible by employers, and this may lead some companies to eliminate these programs.
- Miscellaneous Itemized Deductions. Itemized deductions such as tax preparation fees, investment management fees, IRA trustee fees, and safe deposit box charges are no longer deductible.
- Casualty Losses. Casualty losses that exceed 10 percent of adjusted income from uninsured losses from fires, storms, thefts, and the like are no longer deductible unless the loss is sustained in an official national disaster.
- Alimony Payments. Alimony codified in divorce agreements will no longer be deductible for couples who sign divorce or separation paperwork after Dec. 31, 2018.
Your CPA Can Help
With all the changes in store for next tax filing season, planning should start now to avoid unexpected surprises. Your local CPA
can help run calculations using your current situation and determine how you may be affected by the adjusted deductions for the next filing season. To find a CPA in your area or for more financial tips, visit www.picpa.org/moneyandlife