Itemized Deductions
Not much has changed regarding Itemized Deductions since the new tax law passed in 2017. Here is a refresher on what changed for itemized deductions as a result of the new law:
- Medical and dental expenses — If your expenses in these categories are more than 7.5 percent of your adjusted gross income, you get a deduction.
- State and local taxes — You will not be able to deduct state and local income, sales and property taxes if your deductions exceed $10,000; $5,000 for married taxpayers filing separate returns.
- Miscellaneous deductions — Don’t try to deduct any job-related expenses that exceed 2 percent of your adjusted gross income. Included are such unreimbursed employee expenses as uniforms, union dues and the deduction for business-related meals, entertainment and travel.
- Home equity loan interest — You won’t be able to deduct interest that you paid on home equity loans except if you took out the loan to buy, build or substantially improve your main home or second home.
- Limit for charitable contributions modified — The limit on charitable contributions of cash has increased from 50 percent to 60 percent of your adjusted gross income, so you may be able to deduct more of your charitable cash contributions.
- Deduction for casualty and theft losses has been modified — Net personal casualty and theft losses are deductible only to the extent that they’re attributable to a federally declared disaster. You can elect to deduct the casualty loss in the tax year immediately preceding the tax year that you incurred the disaster loss.
Because the standard deduction was nearly doubled by the new law, many taxpayers will opt not to itemize.
Finally, note a potential silver lining: You may be able to deduct more of your total itemized deductions if your itemized deductions were limited in the past due to the amount of your adjusted gross income. The old rule that limited the total itemized deductions for certain higher-income individuals has been suspended.
Above the Line Deductions
Above the line deductions are those that are taken before Adjusted Gross Income is calculated, unlike Itemized Deductions. Above the Line Deductions have not changed much since the passage of the new tax law either. Below are two changes from the new tax law that may affect you.
- The deduction for moving expenses is suspended — There is no deduction for use of an automobile as part of the move, either. However, if you are a member of the U.S. Armed Forces on active duty and move because of an order, and you don’t get reimbursed by the government for the expense, you can deduct it from your taxes. If you had to move for work other than the armed services and your employer reimbursed you, count that money as taxable income.
- Repeal of deduction for alimony payments — Alimony and separate maintenance payments are no longer deductible for any divorce or separation agreement executed after Dec. 31, 2018. Note that alimony and separation maintenance payments are no longer included as income, so you won’t need to report these payments on your tax return.
