Tax tip: Some popular tax deductions going away

Tax tip: Some popular tax deductions going away

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Tax tip: Some popular tax deductions going away
  #1  
Old 01-23-2018, 08:47 AM
Bloom&Company Bloom&Company is offline
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Default Tax tip: Some popular tax deductions going away

SOME POPULAR TAX DEDUCTIONS GOING AWAY IN 2018

1. Personal exemptions
The biggest move that the tax reform bill made was to take away personal exemptions, which generally allowed taxpayers to reduce their taxable income by $4,050 per person including dependents.

2. Home equity loan interest
Mortgage interest on purchase loans is still deductible under tax reform up to $750,000, but the deduction for interest on home equity loans becomes nondeductible once 2018 begins. 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.

3. Moving expenses
Taxpayers won't be allowed to deduct moving expenses, as they can for 2017. To be deductible, a move had to be motivated by a job change, with the new job being at least 50 miles further from where you used to live than your old job was. The best thing about the moving expense deduction was that you didn't have to itemize deductions to get it, but it will be gone for 2018 and beyond.

4. Casualty and theft losses except in disaster areas
Casualty losses under old law 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 disasters for which a presidential disaster area declaration was made.

5. Job expenses
Money you spent on certain job costs, such as license and regulatory fees, required medical tests, and un-reimbursed continuing education, was available as an itemized deduction to the extent that it and other miscellaneous deductions exceeded 2% of your adjusted gross income. Now, you won't be able to deduct these costs anymore, making it even more worth your while to try to get your employer to pay them on your behalf.

6. Tax preparation fees
Just like job expenses, costs to have your taxes done were also available as miscellaneous itemized deductions. That won't be the case anymore, and any costs for tax preparation will be nondeductible in 2018.

7. Other miscellaneous deductions
A host of other miscellaneous deductions subject to the 2% AGI limitation will all be gone in 2018. These include investment fees and expenses and trustee fees for an IRA if paid separately.

8. Alimony
For divorces occurring after 2018, payments to a former spouse in the form of alimony (also known as spousal support) will no longer be a tax deduction. Divorces finalized before 12/31/2018 with alimony clauses, will still be tax deductible to the spouse paying the support.

If you would like to discuss your tax needs, please call Robert Bloom, CPA at 425 941 5224. I come to your home, meet with you and review your tax needs at no charge. If you want to work together, I will do your return, bring it back to you, and I am available throughout the year for questions and consultation. I am reliable, responsible, reasonably priced, and enjoy positive relationships with my clients and discussing taxes. I had a 35 plus year tax practice in Seattle, Washington with 1,000 clients, and focused on closely held businesses and individual returns. I am now licensed in Florida, I am a Villager, and focusing on those living in The Villages and greater Lady Lake area.

Bob Bloom, CPA 425 941 5224
bobbloomcpa@aol.com

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Old 01-23-2018, 10:45 AM
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2. Home equity loan interest
Mortgage interest on purchase loans is still deductible under tax reform up to $750,000, but the deduction for interest on home equity loans becomes nondeductible once 2018 begins. 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.

Does this apply to home equity lines that existed in 2017 but were paid off at the end of the year in 2017?
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Old 01-23-2018, 11:24 AM
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Thank you for the update!
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Old 01-23-2018, 11:25 AM
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All this is true. Those deductions have gone away, but we get to keep more of our income.
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Last edited by graciegirl; 01-23-2018 at 11:33 AM.
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Old 01-23-2018, 12:34 PM
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Quote:
Originally Posted by graciegirl View Post
All this is true. Those deductions have gone away, but we get to keep more of our income.
That last sentence is not universally true as deductions of alimony and interest on home equity loans are gone as above reported. Nor will interest on new mortgages over $750K be deductible. The old limit was $1M. Plus the itemized SALT deductions for property tax and state sales or income tax are now capped at a mere $10K! It looks to me like the $150 to $500K earners will pay more tax.

Your Complete Guide to the 2018 Tax Changes -- The Motley Fool

On the other hand C corporation rates are way down which has already boosted the economy and publicly traded common stock valuations.
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Last edited by manaboutown; 01-23-2018 at 01:11 PM.
Home equity line interest paid off in 2017
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Old 01-23-2018, 02:33 PM
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Default Home equity line interest paid off in 2017

Thank you for asking. No, The interest is fully deductible in 2017. The law is effective in 2018, so since it was paid off in 2017, it is not an issue.


Quote:
Originally Posted by jnieman View Post
2. Home equity loan interest
Mortgage interest on purchase loans is still deductible under tax reform up to $750,000, but the deduction for interest on home equity loans becomes nondeductible once 2018 begins. 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.

Does this apply to home equity lines that existed in 2017 but were paid off at the end of the year in 2017?
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