In late 2017 a new tax bill was passed that will affect the tax code starting in 2018. One of the biggest elements of this bill is the shift in how taxpayers will be able to take tax deductions.
Changes to the Standard Deduction
When you file your taxes, you have a choice: You can take the standard deduction, or you can itemize your deductions. One of the most dramatic changes in 2018 is the increase in the standard deduction.
In 2017, the standard deduction for married taxpayers filing jointly was roughly $13,000. In 2018, that amount has increased to $24,000. One of the goals behind this new standard deduction amount is to simplify the filing process so fewer taxpayers have to itemize their deductions.
Changes to Itemized Deductions
Along with the change to the standard deduction, there are also major changes to the rules around itemized deductions. In 2018, many itemized deduction categories have been changed or eliminated.
Deductions that have been eliminated include:
- Casualty and theft losses (except for losses related to a federally declared disaster)
- Tax preparation expenses
- Moving expenses
- Unreimbursed employee expenses
- Employer-subsidized reimbursement for parking and transportation
Deductions that have undergone major changes include:
- Mortgage interest (still deductible, but the new cap is $750,000, down from $1,000,000 in 2017)
- Charitable contributions (taxpayers can now deduct up to 60% of their income, up from a previous cap of 50%)
- Medical expenses (reduced from 10% of your adjusted gross income to 7.5%)
Unlike most of the changes seen in the 2018 bill, this last provision regarding medical expenses is retroactive to include 2017 expenses. This means you’ll have to take this new rule into account if you deduct medical expenses on your 2017 taxes this spring.
Every tax situation is different, so there’s no good way to inform everyone about how this tax bill will impact them specifically. If you have questions about how the changes to the deduction rules will affect your tax liability and filing, call the pros at Taxation Solutions, Inc. We’re here to help folks in Cincinnati understand the parameters of these new rules and assess what kind of impact they will have for you. Call our team today to set up an appointment!