Many tax deductions gone but not forgotten Part 2

Earlier this week we looked at how the new tax cuts and jobs of 2017 has changed what is deductible and what is not. Congress also included a significant reduction in mortgage interest as part of the reform package. In 2017, taxpayers could deduct interest on a mortgage of up to $1 million. Starting in 2018, only interest on the mortgage value capped at $750,000 will be deductible. purchase loans is still deductible up to $750,000, but the deduction for interest on home equity loans becomes nondeductible from January 1, 2018. Unlike with purchase loans, there’s no grandfathering provision for existing home equity loans, so for those for whom the deduction is important, looking at potentially repaying those loans sooner than expected might be worth considering when preparing for your 2019 tax bill.

The remaining five of the big nine                                                                         

Miscellaneous itemized deductions. Unreimbursed employee work expenses is just one of several miscellaneous itemized deductions that have been disallowed under the new law. Lawmakers also pitched the unreimbursed qualified employee education expenses deduction.

tax cuts and jobs act of 2017

Other miscellaneous itemized deductions include costs related to tax preparation services, investment fees, professional dues and a long list of other approved items. To be deductible, the total amount of these miscellaneous expenses must exceed 2 percent of a person’s adjusted gross income.

Casualty and theft losses except in disaster areas. These were eligible as itemized deductions to the extent that they exceeded $100 plus 10% of your adjusted gross income. Events included not only natural disasters but also fires, robberies, and other qualifying occurrences. The new law now preserves the deduction only for catastrophic events that the president has declared a natural disaster. And, to follow on this provision, Unrestricted deductions related to natural disasters. In 2017, homes were ravaged by hurricanes, wildfires and floods. People whose lives were impacted by these disasters could deduct at least a portion of any losses incurred by the events that were not covered by insurance or another relief program on their taxes this year. The picture has changed for 2018, however. Now, not everyone will have access to that deduction. The difference is that while the deduction remains the same, those who have suffered losses need to be located in a presidentially designated disaster zone in order to receive the deduction.

Next, we have the Alimony deduction. In the past, couples could set up alimony agreements that would allow the person making payments to deduct that money from their federal taxes. That won’t be an option in 2019. The deduction is being eliminated for any divorce commencing before December 31 of this year.

And, finally, we have the Subsidized parking and transit reimbursement deduction. In the past, employees were eligible to receive up to $255 per month from their employers to subsidize parking costs or transit passes. Workers didn’t have to include those perks in income on their returns, and their employer could deduct it. Now, for the 2018 tax year, the corporate deduction for that cost will go away, and unfortunately, that could lead some businesses to stop offering those programs to workers.

To some reform may mean some real savings, to others, it may increase their burden. But, take heart, because many provisions of the new tax law will expire in 2025 unless Congress votes to extend them. That means it could just be a matter of time before cost-saving deductions make a comeback.

Bottom line: the new tax code is complex and cumbersome for business. To navigate the new legislation, you need trusted experts and advisors who understand the nuances of accounting. We are here for you! Visit us at TYSLLP.com.

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