The Tax Cuts and Jobs Act, which handed in December 2017, concerned a few of the most sweeping modifications to the U.S. tax system in additional than 30 years. And Americans will expertise the consequences of these modifications after they file taxes for 2018.
“Many itemized deductions … will be capped, eliminated or otherwise diluted in power,” mentioned Ben Flood, a licensed monetary planner and vice chairman of Bigelow Investment Advisors. “Offsetting this for many tax filers is the fact that the standard deduction is significantly higher.”
How a lot larger? Nearly double what it was in 2017: $12,000 for people and $24,000 for households.
That means will probably be so much more durable to qualify to itemize deductions. Those who do will discover many variations in what they will declare. Here’s a take a look at the deductions you received’t be capable of declare in your 2018 taxes ― and what you are able to do as an alternative.
9 Tax Write-Offs You Can’t Claim Anymore
A private exemption is a sum of cash you possibly can deduct for your self and any dependents out of your taxable earnings. The private exemption was price $4,050 in 2017. A household of 4, for instance, would have obtained $16,200 in exemptions final 12 months.
“Now, personal exemptions are no longer in play,” mentioned Christina Taylor, head of tax operations at Credit Karma Tax. “This could have a substantial impact on refunds for larger families.”
2. Casualty and theft losses
Prior to the most recent tax invoice, victims of fires, earthquakes, floods or comparable pure disasters who skilled uninsured losses larger than 10 % of their adjusted gross earnings might deduct a portion of these losses from their taxable earnings.
Now? “You’ll only be able to claim them if they were a result of a federally declared disaster,” Taylor mentioned. Those designations are made on a county foundation, which suggests some areas may very well be declared official catastrophe zones, whereas others couldn’t.
3. Unlimited SALT deductions
The new tax regulation decreased the quantity taxpayers can declare for taxes paid to companies that aren’t the IRS, in accordance with Arthur Rosatti, an lawyer with Ashley F. Morgan Law. These are usually known as SALT, or state and native taxes.
“There is now a $10,000 cap on all state income taxes, personal property taxes, sales tax and local taxes,” he mentioned. Prior to 2018, there was no cap. “This will hit individuals who are higher income and live in states with income tax the most,” Rosatti mentioned.
4. Mortgage curiosity above $750,000
Homeowners beforehand have been capable of write off the curiosity on mortgages as much as $1 million. Under the brand new tax regulation, nonetheless, the cap has been decreased to $750,000 in certified residence loans. According to the IRS, that restrict applies to the mixed quantity of loans you employ to purchase, construct or “substantially improve” your major or second house.
The excellent news is this modification solely applies to new householders, in accordance with Josh Zimmelman, proprietor of Westwood Tax & Consulting. “The $1 million cap still applies to homeowners who took out a mortgage before December 15, 2017,” he mentioned. “New homeowners can take this deduction on mortgages up to $750,000.”
5. Unrestricted house fairness loan curiosity deduction
Before the brand new tax regulation, householders might deduct curiosity paid on a house fairness loan or line, or credit of as much as $100,000, no matter how the funds have been used. For instance, if a home-owner used a house fairness loan to repay credit card debt, they’d obtain a tax break on the curiosity paid.
“In 2018, unless that taxpayer used the borrowed funds to buy, build or substantially improve either their primary home or a second home, the interest is not deductible,” mentioned Shan-Nel D. Simmons, a former IRS income agent and proprietor of Nel’s Tax Help.
Taxpayers beforehand might deduct sure transferring bills associated to relocating for a brand new job, Zimmelman mentioned. This was an “above-the-line” deduction, which means it may very well be claimed even when the taxpayer didn’t itemize.
“Now the only people who can take this deduction are military service members moving for assignment,” Zimmelman mentioned.
In the previous, if a taxpayer’s job required sure purchases to ensure that an worker to carry out their job and the employer was unable or unwilling to reimburse the worker, these bills have been tax deductible. For instance, staff might deduct mileage pushed for work functions (not commuting), uniforms, instruments, union dues and extra so long as they met the two % rule for miscellaneous deductions.
However, starting in 2018, “employees will not be allowed to deduct out-of-pocket work expenses they pay to do their job,” Simmons mentioned. This deduction, together with different miscellaneous deductions, is suspended by way of 2025.
Prior to 2018, charges associated to tax preparation is also mixed with different miscellaneous deductions that exceeded 2 % of your adjusted gross earnings. This deduction has been suspended by way of 2025, in accordance with Taylor.
9. Other miscellaneous bills
Many different miscellaneous deductions are off the desk for 2018. Also included on this bunch are bills associated to funding charges, authorized charges, house workplace use and alimony for divorces finalized after December 31, 2018. These deductions might be reinstated in 2026 until Congress votes to increase the present rule.
5 Valuable Deductions And Credits You Can Still Claim
Though it looks like taxpayers misplaced many essential deductions for the 2018 tax 12 months, the elevated commonplace deduction might assist take the sting out of dropping these advantages, Flood mentioned.
Plus, there are a number of beneficial tax write-offs, a few of which have been beforehand on the tax invoice’s chopping block, that stay for 2018. Those embrace:
Families may be capable of offset a few of the private exemption loss with the revised Child Tax Credit, which is now price as much as $2,000 in 2018. “Congress also raised the income threshold to $200,000 (for single filers) before the credit starts to phase out,” Rosatti mentioned. “The new law is also giving a $500 credit for qualifying dependents who are not children.”
Taxpayers who do itemize can nonetheless deduct qualifying charitable donations. The deduction is restricted to 60 % of adjusted gross earnings for money presents ― up from 50 % in earlier years. Any quantity in extra of that may be carried ahead as much as 5 years.
3. Student loan curiosity deduction
Another above-the-line deduction accessible to student loan debtors is a deduction on the curiosity paid. Borrowers can deduct of as much as $2,500 in curiosity per 12 months. The deduction begins to section out for debtors with an adjusted gross earnings over $65,000 and caps at $80,000.
4. Contributions to IRAs and HSAs
If you contribute to a tax-advantaged financial savings plan, similar to a person retirement account or well being financial savings account, these contributions are nonetheless eligible for a similar tax advantages.
5. Self-employed bills
Though the miscellaneous deductions outlined above have been suspended by way of 2025 for normal staff, self-employed employees can nonetheless write-off qualifying work-related bills. Deductions similar to self-employment taxes, insurance premiums and sure ― a house workplace ― will be claimed utilizing the Schedule C kind.