This tax-filing season, taxpayers are poised to experience the impact of the Tax Cuts and Jobs Act of 2017, which eliminated beneficial deductions and credits. Touted as the largest tax overhaul in 30 years, the law could be a mixed bag for many households as it increases the standard deduction and child tax credit, but makes more than a dozen deductions extinct.
Some filers may receive a significant tax break, while others may see their refunds shrink as a result of new deduction rules. "Most people won't know until they fill out their tax forms," says Shaun McClung, a Tampa, Florida-based tax managing director at the accounting firm CBIZ MHM, LLC.
[See: 15 Tax Questions -- Answered.]
While some crucial tax breaks might return after some provisions of the tax law expire in 2025, here are 12 tax deductions that disappeared this year:
-- The standard $6,350 deduction.
-- Personal exemptions.
-- Unlimited state and local tax deductions.
-- A $1 million mortgage interest deduction.
-- An unrestricted deduction for home equity loan interest.
-- Deductions for unreimbursed employee expenses.
-- Miscellaneous itemized deductions.
-- A deduction for moving expenses.
-- Unrestricted casualty loss deduction.
-- Alimony deduction.
-- Deductions for certain school donations.
-- Deductions from tax extenders.
If you typically deduct many of these items from your taxes, you could be in trouble this year, says Carla Wainwright, a certified public accountant and director of tax for finance firm MAI Capital Management, LLC in Cleveland. Read on for more information on the tax deductions that have changed or become extinct.
1. The standard $6,350 deduction. Some of the best news from the tax reform law is an increase in the standard deduction. While single taxpayers were only eligible for a $6,350 standard deduction last year, that amount nearly doubled in the 2018 tax year to $12,000 for individuals. Married couples will get a standard deduction of $24,000 for 2018, up from $13,000 for 2017. And head of household filers will see a bump in their standard deduction from $9,550 to $18,000 for 2018.
2. Personal exemptions. The increased standardized deduction will be welcome news for many households, but there's a catch: Personal exemptions have been eliminated. While not technically a deduction, the exemption allowed taxpayers to subtract $4,050 from their taxable income for each dependent they claimed, so eliminating it is a significant loss for families. The increased standard deduction helps soften the blow of losing personal exemptions, but it might not make up for it entirely, says Mark Jaeger, director of tax development for TaxAct, a provider of tax preparation software and services.
3. Unlimited state and local tax deductions. On this year's tax forms, deductions for state and local taxes -- known as SALT deductions -- are capped at $10,000. "That to me is the one (new tax code rule) that is going to impact middle class taxpayers the most," McClung says. It will particularly affect those living in states like California and New York, which both have above-average state income tax and property tax rates.
4. A $1 million mortgage interest deduction. Another change that could disproportionately affect those living in states such as California and New York is the restriction on the amount of mortgage interest that can be deducted. Last year, married taxpayers could deduct interest on a mortgage of up to $1 million. For the 2018 tax year, only interest on mortgage values of up to $750,000 are deductible.
5. An unrestricted deduction for home equity loan interest. The tax law also eliminates the unlimited interest deduction for both new and existing home equity loans. Homeowners used to be able to deduct interest for loans taken out for any purpose such as debt consolidation or travel. Now, only interest on loans used to make home improvements are eligible for a deduction. Plus, the combined total of the first mortgage and home equity loan can't exceed $750,000 for married couples filing jointly.
6. Deductions for unreimbursed employee expenses. Workers who made unreimbursed purchases related to their job were able to deduct any amount that exceeded 2 percent of their adjusted gross income in 2017. However, taxpayers won't see that deduction available on their 2018 tax return. "I'm sure a lot of employees are going to be pushing back to get more things covered by employers now," Wainwright says.
7. Miscellaneous itemized deductions. Unreimbursed work expenses is just one of several miscellaneous itemized deductions that have been disallowed under the new law. Fees for financial services is another example. "(Taxpayers) used to be able to deduct advisor fees and tax preparation fees," McClung says. Other disappearing miscellaneous deductions include costs related to tax preparation services, investment fees, professional dues and a long list of other previously approved items.
8. A deduction for moving expenses. If you relocated for a new job last year, forget about deducting your moving expenses from your 2018 taxes. The deduction has been eliminated for virtually all workers. "It actually only applies (now) to military members who are required to move," Jaeger says.
9. The unrestricted casualty loss deduction. In 2018, only those in presidentially designated disaster zones can deduct casualty losses on their tax forms. That means, for example, if your house burns down but insurance doesn't cover all your costs, you can't write off the loss from your federal taxes.
10. Alimony deduction. In the past, couples could set up alimony agreements that would allow the person making payments to deduct that money from their federal taxes. That won't be an option this year. "You won't be able to deduct alimony anymore because it's not taxable to the recipient," Wainwright says. And since alimony is no longer considered income, the recipient can't deduct any of the legal fees they incurred to get it for any divorce completed after Dec. 31, 2018.
11. Deductions for certain school donations. Some colleges and universities require alumni to make donations before they are able to purchase season tickets. "That donation to the school used to be allowed as a deduction," Jaeger says. However, donations tied to the right to purchase tickets are no longer deductible for the 2018 tax year.
12. Deductions from tax extenders. Each year, Congress passes legislation extending temporary tax breaks. Known as tax extenders, these include deductions for college tuition and fees and mortgage insurance premiums. Legislative leaders have yet to approve tax extenders for this year, and "it's not looking like it's going to be passed," Jaeger says.
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