Changes in tax deductions

A lot has changed with the new Tax Cuts and Jobs Act of 2017 created by President Donald Trump. For instance, one of these changes that happen is when you file your taxes next year: You won’t be able to deduct expenses from relocating for a new job.

The new tax law will have a significant effect on income tax returns next year. There are 10 changes that will eliminate and change some deductions on your tax forms.

There’s some good news in that the standard deduction has increased to $6,350, up from $6,300. Married couples will also see their standard deduction go up from $13,000 to $24,000 and head of household filers will also see a rise in their standard deduction from $9,550 to $18,000. “The majority of Americans are going to fall under the standard deduction,” says Michael Foguth, president and founder of Foguth Financial Group. “That may save taxpayers time as well as money.”

Because of the increase in the standard deduction, finance experts indicate there may not be a need to save receipts or document spending, since they likely won’t be itemizing.

Another change is that taxpayers will lose the $4,050 personal and dependency exemptions. Taxpayers used to be able to deduct $4,050 for each dependent they claimed.

Additionally, deductions for state and local taxes, known as SALT deductions, will top at $10,000. “This will have a significant impact on those in New York, California and other states where people pay high property taxes,” said the chairman of the tax and accounting department for MBAF, Miguel Farra. Several states are investigating other ways to recoup some of the lost deductions.

Another change that there will be a cap on mortgage interest deductions. This will affect taxpayers in high-mortgage states such as California and New York. Taxpayers can currently 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.

Adding to the reduction in mortgage interest, the home equity loan interest deduction is completely gone, and there is no grandfathering in.

Workers who made unreimbursed purchases related to their job can only deduct the amount that exceeds 2 percent of their adjusted gross income in 2017; however, that deduction is being eliminated for 2018.

A change related to divorced taxpayers has also occurred. In the past, couples set up alimony agreements that allowed 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 finalized after Dec. 31, 2018.

Deductions relating to natural disasters have also changed this year. Families impacted by natural disasters this year can deduct at least a portion of any losses incurred by the events that weren’t covered by insurance or any other relief program. However, in 2018, not everyone will have access to that deduction. Your area must be in a presidentially designated zone in order to obtain the deduction.