Your Guide to This Year's Tax Deduction Changes
The 2019 tax season begins at the end of January, but taxpayers will no longer be able to rely on five important exemptions that have saved them money in years past, thanks to the Tax Cuts and Jobs Act, which became federal law more than a year ago. Plus, there’s a new $10,000 cap on in-state and local tax (SALT) exemptions and a $750,000 cap on mortgage interest deductions, all of which add up to a brand-new tax landscape for you to navigate this year. Here's what you (or whoever prepares your taxes) need to know in order to avoid a nasty surprise from the IRS.
Tax deduction #1: personal exemptions
Standard deduction amounts have increased for 2018 income tax filers to $12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples filing jointly (and spouses who've survived the death of their partner). Despite the increase, there's a catch. Last year, eligible taxpayers could claim a tax exemption of $4,150 for themselves, a spouse and eligible dependents. Starting with the 2019 tax season, there are no personal exemptions. The Tax Cuts and Jobs Act suspended them for tax years 2018 through 2025.
In other words, in 2017, a married couple with adjusted gross income of $75,000 and two kids would have had a total of $16,600 in personal exemptions in 2018 (or $4,150 per person). That’s on top of the $12,700 standard deduction the couple would have received for filing jointly that year. This year that same couple can claim $0 in personal exemptions. Some experts say the increase in the child tax credit will offset the loss of personal exemptions, but it won’t help everyone, especially if your dependent children are over the age of 16 during the tax year, which disqualifies them from the child tax credit.
Standard Deduction Change from 2017
Your Filing Status | 2017 | 2018 |
|---|---|---|
Single | $6,350 | $12,000 |
Married filing separately | $6,350 | $12,000 |
Married filing jointly | $12,700 | $24,000 |
Head of household | $9,350 | $18,000 |
Tax deduction #2: moving expenses
Taxpayers will no longer be able to deduct moving expenses from their 2018 taxable income with the exception of active-duty members of the U.S. armed forces who are ordered to relocate. So if your employer reimbursed you for moving expenses in 2018, that reimbursement will be considered taxable income.
Tax deduction #3: home equity loan interest
The home equity line of credit interest deduction is gone. That means if you have an existing home equity loan, you can't deduct the interest from your taxes—unless you can connect it to home improvements.
Tax deduction #4: out-of-pocket job-related expenses
Miscellaneous tax deductions for job-related expenses have been suspended under the TCJA. That includes unreimbursed employee expenses, such as union dues, uniforms, qualified employee education expenses, and business-related travel, meals and entertainment. So, if you paid for any job-related expenses out-of-pocket in 2018, you’re out of luck.
Tax deduction #5: casualty and theft losses
The Tax Cuts and Jobs Act modified the tax deduction for casualty and theft losses, limiting it to only taxpayers who suffered losses as a result of a federally-declared disaster. The loss must exceed $100 per casualty and the net total loss must exceed 10% of your adjusted gross income, according to the IRS.
Tax deduction #6: $750,000 mortgage interest cap
Last year, taxpayers could deduct interest on a mortgage of up to $1 million. Starting in the 2018 tax year, only interest on the mortgage value capped at $750,000 will be deductible.
Tax deduction #7: SALT deductions
The $10,000 cap in state and local tax (SALT) exemptions goes into effect this year, which will have a significant impact on people in states that have high property taxes, such as New York and California. New York and California are exploring strategies to offset the lost SALT deduction and retain high-income taxpayers, but nothing has changed yet in those states.
