She Strengthens

Tax Reform Update: What’s In and What’s Out for 2018

As the dust settles on the latest tax reform, it’s essential to understand how these changes will impact your 2018 tax returns. One of the most significant areas affected is deductions – those expenses that can be written off to reduce taxable income and, subsequently, tax bills.

To Itemize or Not to Itemize?

Before diving into specific deductions, consider whether to take the standard deduction or itemize your expenses. The standard deduction has increased significantly, jumping from $6,350 in 2017 to $12,000 in 2018 for individuals and from $12,700 to $24,000 for married couples filing jointly. However, it’s crucial to ensure you have supporting documentation for your deductions, as lacking this can result in disallowed claims.

Deductions You Can Still Claim

If you choose to itemize, here are some common deductions available for tax year 2018:

• Student Loan Interest: Up to $2,500 in interest paid on student loans is still deductible, regardless of whether you itemize or take the standard deduction.
• Medical Expenses: If your medical expenses exceed 7.5% of your income, they’re considered tax-deductible. This includes insurance premiums, medical equipment, and even home renovations for health reasons.
• Mortgage Interest: Homeowners who purchased a home after December 15, 2017, can deduct interest payments made on their first $750,000 worth of mortgage loans.
• Home Equity Loans: You may still be able to deduct up to $100,000 in interest paid on home equity loans, but only if used specifically for home improvements.
• State, Local, and Property Taxes: You can now only deduct up to $10,000 of these taxes, a significant change from the previous unlimited deduction.
• Charitable Donations: Donations to charity, including physical items and volunteer work, are still deductible. Consider bundling contributions to increase the likelihood of itemizing.
• Natural Disaster Repairs: Taxpayers affected by natural disasters can deduct personal property losses not covered by insurance or other relief programs.
• Traditional IRA Contributions: You may be able to deduct money invested in a traditional IRA, depending on your income and access to work retirement plans.

Deductions That Are No More

Unfortunately, some popular tax deductions have been eliminated:

• Moving Expenses: Unless you’re active duty military, you can no longer deduct moving expenses for a new job.
• Miscellaneous Job-Related Expenses: Unreimbursed job expenses, including car rentals and continuing education costs, are no longer deductible.
• Fees for Financial Services: Individuals can no longer deduct the cost of working with investment advisors or tax professionals.
• Personal Exemptions: The $4,000 exemption for each claimed dependent has been eliminated, with the hope that the higher standard deduction will make up for it.

Remember to consult your tax or legal adviser regarding specific tax matters, as this information is provided for informational purposes only.