Tax Deductions You Can No Longer Count On

The Tax Cuts and Jobs Act of 2017 enacted changed that start to take effect this tax season. Some of these changes are that there are tax deductions that you can no longer take advantage of. In this article, we are going to go over the tax deductions that are going away.

tax deductions

Personal and Dependent Exemptions

Personal and dependent exemptions used to allow you to reduce your taxable income by $4,050 for yourself and any dependents that you claim. Even though these are not technically deductions, they do allow you to reduce your taxable income. Due to the higher standard deduction, the personal and dependent exemptions are being done away with. Depending on the size of your family, the higher standard deduction may not make up for the loss of the exemptions, so you may have to find a back up plan to help reduce your income.

Commuter Tax Benefits

In past tax years there used to be several tax benefits for commuters. But with the TCJA those benefits have been phased out. This includes the $20 a month reimbursement that employers could give to employees for the bicycle commuting expenses tax free. It also removes employer tax deductions for packing, transit, and carpooling benefits paid to employees. Employees can still receive up to $260 a month tax free for parking, transit, and vanpooling benefits. But these are not longer deductible to the employer.

Moving Expenses

Under the new tax laws, no expenses for moving are deductible, no matter how far the move is. The only exception is if you are on active military duty and you are moving for a service related reason.

Alimony

The alimony deduction allowed the spouse who was paying alimony to receive a deduction for the amount paid. But the receiving spouse would have to pay taxes on the alimony amount received. Now for any divorces that happen after December 31, 2018 this deduction will no longer be available to the paying spouse and the receiving spouse will not have to pay taxes on the amount. Any alimony payments initiated before December 31, 2018 are not affected by this change.

Casualty and Theft Losses

Now you are no longer able to deduct losses from a disaster or theft that were not covered by your insurance policy. However, if you live in a Presidentially Designed Disaster Zone you can take a disaster loss deduction.

Unreimbursed Job Expenses

In the past, you could deduct unreimbursed job expenses. This would include out of pocket expenses such as travel, transportation, meals, union/professional dues, work-related education, the cost for finding a new job, and uniforms. Now you are no longer able to deduct those expenses. This is a big hit for many people, and you should plan ahead for its effects.

Other Deductions

There are also a few other deductions that are going away. These include:

  • Foreign Property Taxes: You can no longer deduct taxes paid on foreign real estate.
  • Investment Expenses: Fees for investment management, tax advice, and legal advice are no longer deductible.
  • Tax Preparation Fees: You are no longer able to deduct the cost of software, professional fees, electronic filing fees, and fees to fight issues with the IRS.

Preparing for Your Tax Return

If you are worried about the effects of these tax deductions being taken away are going to have on your return, make sure to plan ahead. Meet with your qualified tax preparer before it is too late, to see if there are any last-minute tax moves you can take advantage of.

Questions? Want to schedule an appointment? Contact us by clicking here.