The 5 Things That Are Going Away With the New Tax Reform

Itemized deductions have been a time-honored tradition for taxpayers for years and the creativity that they can inspire have been a marvel. However, as the saying goes, all good things must come to an end, and under the new Tax Cuts and Job Act of 2017 (TCJA), numerous cherished itemized deductions have been eliminated in favor of a doubling of the standard deduction. Let us take a moment to remember the itemized deductions lost starting on January 1, 2018:

1) Personal exemptions. The personal exemption essentially allowed you to take a deduction on yourself in any given tax year. Essentially, you were able to deduct a certain percentage of your income from your taxable income, which means that you would then pay a tax on a smaller overall pool of money. So, for example, if you had earnings of $40,000 in 2017, you were allowed to deduct $4,000 of that amount from your overall taxable income. Thus, if you paid 25% in taxes, you would save $1,000. Some taxpayers will not see a noticeable difference now that the personal exemption is gone with the increase in the standard deduction, but others will.

2) Home equity loan interest. If you take out a home equity loan in 2018 and beyond, you will not be able to deduct the interest that you pay on the loan. However, mortgage interest on loans used to purchase property is still deductible for a loan of up to $750,000. The takeaway for those looking to take out home equity lines of credit is to be prepared to pay those loans back as quickly as possible to avoid accruing any more non-deductible interest than necessary.

3) Moving expenses. This may have been one of the more rare exemptions that someone might take, but it was very attractive. As long as the move was for a job change more than 50 miles away, the law before 2018 allowed you to deduct the expenses associated with moving without itemizing the deductions.

4) Job expenses. In some professions, it takes money to keep a job whether it is license fees, ongoing education classes, or required tests. Under the old law, you could deduct these costs provided the deductions along with other miscellaneous deductions amounted to two percent or more of your adjusted gross income. Now, it is even more worthwhile to see if your employer will take on those costs for you.

5) Losses due to theft and natural disasters outside of a disaster area. Prior to 2018, you could deduct losses due to theft, fire, or other natural disasters if they were over 10% of adjusted gross income plus $100. This deduction has been scaled back significantly to only include losses from natural disasters in areas that receive a presidential declaration of disaster area.

Of course, the assumption among the pundits has been that the doubling of the standard deduction will be enough to cover the loss of these and other deductions. This will certainly be the case for some taxpayers, but not necessarily for everyone.

If you have questions about your deductions or how the TCJA will affect you in 2018 and the years to come, our knowledgeable and experienced attorneys have the answers you are looking for. Contact us today to get started.  

Written by Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL is a Miami-based law firm focused on providing comprehensive legal support to individuals and corporate entities caught up in tax controversies or charged with a criminal act. As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.