Important Changes to Itemized Deductions when Filing Taxes

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Important Changes to Itemized Deductions when Filing Taxes

Tax law changes in the Tax Cuts and Jobs Act (TCJA) affect almost everyone who itemized deductions on tax returns they filed in the past. One of these changes is that TCJA nearly doubled the standard deduction for most people. As a result, many people may find it better to take the standard deduction. However, some people may still think about itemizing if their total deductions are above the standard deduction amounts.

Furthermore, from experience this tax season, most of our clients did not have to use itemized deduction, therefore helping to complete a more simple tax return to complete. 

Highlights Taxpayers Need to Know if they Plan to Itemize Deductions:

Medical and Dental Expenses
Firstly, taxpayers can deduct the part of their medical and dental expenses. It has to be more than 7.5 percent of their adjusted gross income to qualify.

State and Local Taxes
Secondly, The law limits the deduction of state and local income, sales, and property taxes to a combined, total deduction of $10,000. In addition the amount is $5,000 for married taxpayers filing separate returns. Consequently, taxpayers cannot deduct any state and local taxes paid above this amount.

Miscellaneous Deductions
Moreover the new law no longer allows the deduction for job-related expenses or other miscellaneous itemized deductions that are above 2 percent of adjusted gross income. This includes un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.

Home Equity Loan Interest
In conclusion taxpayers can no longer deduct interest paid on most home equity loans unless they used the loan proceeds to buy, build or substantially improve their main home or second home.

More information:
• Publication 5307, Tax Reform: Basics for Individuals andFamilies
• Publication 501, Standard Deduction, and Filing Information
• Schedule A, Itemized Deductions
• IRS Tax Map

Contact us to get help from one of our tax professionals

Dez
Dez