Tax

8 Tax Deductions Eliminated (or Reduced) Under the New Tax Law

The Tax Cuts and Jobs Act lowered tax rates and nearly doubled the standard deduction, which is expected to reduce taxes for about 65% of taxpayers, according to the Tax Policy Center. But an estimated 29% of Americans will see no change to their tax bill, and 6% of you will pay more. If you’re one of the unfortunate taxpayers who don’t get a lower tax bill, it might be because the tax overhaul scrapped or capped some popular tax breaks.

Here are 8 common tax deductions that were repealed or limited by the new tax

Personal Exemptions

Deductions for personal exemptions, worth $4,050 for each exemption claimed on your 2017 tax return (for you, your spouse and each of your dependents), were eliminated by the new tax law in favor of a larger standard deduction and an expanded child tax credit.

The former deductions were phased out for taxpayers whose adjusted gross income (AGI) exceeded a certain threshold amount. For 2017, the personal exemption deduction was completely phased out for single taxpayers with an AGI of $384,000, head of household filers with an AGI of $410,150, married couples filing a joint return with an AGI of $436,300, and married taxpayers filing a separate return with an AGI of $218,150.

Moving Expenses

In the past, people who relocated for a job and paid the moving costs could deduct most of their expenses, even if they didn’t itemize. The tax overhaul eliminated that deduction unless you’re an active-duty member of the military.

Alimony

If you’re paying alimony under the terms of a divorce agreement finalized by December 31, 2018, go ahead and deduct your payments. For divorce agreements reached after 2018, though, alimony is no longer deductible, which is why courthouses were very busy at the end of last year. The deduction is also lost if an existing agreement is changed after 2018 to exclude the alimony from your former spouse’s income.

Ex-spouses who receive alimony payments under an agreement finalized or modified after 2018 will no longer have to pay taxes on the money.

Miscellaneous Itemized Deductions

These deductions included the write-off for tax preparation fees, investment fees, hobby losses, job search expenses, safe deposit boxes and unreimbursed business expenses. Previously, taxpayers could deduct these expenses if they exceeded 2% of their adjusted gross income.

The loss of these deductions could be particularly costly for employees with significant unreimbursed business expenses. For example, an employee who uses his or her own car to visit clients—and isn’t reimbursed for the mileage—could end up with a higher tax bill this year. The change could also prove costly for employees who work remotely, since they’ll no longer be allowed to deduct the cost of maintaining a home office. (The new tax law doesn’t affect the ability of self-employed workers to claim a home-office deduction.)

Interest on Home Equity Loans or Lines of Credit

Starting with 2018 tax returns, you can deduct interest on home equity loans or lines of credit only if the money is used to buy, build or improve your home. If you use the cash to pay for other expenses – college tuition, for example – the interest isn’t deductible anymore.

Supersized Mortgages

In the past, you could deduct interest on a mortgage of up to $1 million ($500,000 if you’re married filing separately). If you closed on a loan by December 15, 2017, you still qualify to deduct interest on that amount. For loans acquired after that, you can only deduct interest on up to $750,000 ($375,000 if you’re married filing separately). You can also still deduct interest on a second home, but total mortgage interest is capped at $750,000…………Read More>>

 

Source:- kiplinger