Contact Us
Firm Overview
Why Legend Is Different
Client Types
Professional Biographies
Frequently & Rarely Asked Questions
Risk Spectrum
Investment Strategies
Second Opinion
Global Investment Pulse
Event Calendar
Press Center
Legend News
Clients Only
Career Opportunities
Directions
Newsletter Sign-up
Site Search
Site Map
Home
Tell A Friend About This Website
 
 
 
Informational Booklets   
Phone: (412) 635-9210
  (888) 236-5960
Connect With Legend:
Subscribe to me on YouTube

A Guide To The New Rules On Tax Deductions In 2018

Uncle Sam giveth, and Uncle Sam taketh away. The new federal tax code, which went into effect in 2018 and affects the return you'll file in spring 2019, lowers taxes by expanding some deductions, but restricts or outright eliminates others.

Deductions lower your taxable income so you pay less tax. Here's how deducting items from your income were expanded, restricted, or eliminated.

EXPANDED DEDUCTIONS

Standard deduction. The standard deduction is the amount you can subtract from your taxable income if you don't itemize - that is, individually deduct items like mortgage interest, charitable donations, and car loans. Nearly doubling the standard deduction to $24,000 for joint filers and $12,000 for singles pushes it up from $12,700 and $6,350, respectively. Fewer than half of taxpayers who itemized their 2017 return are expected to itemize their 2018 return. If you file using the standard deduction, preparing your return will be much simpler. If the standard deduction is less than the total of your itemized deductions, you'll still want to file by itemizing, subject to the rules below.

Medical expenses. If you itemize deductions, medical expense deductions will be more generous. For tax years 2017 and 2018, medical outlays in excess of 7.5% of your adjusted gross income are deductible. Starting in 2019, the threshold rises to the previous level of 10%. Congress is widely expected to consider extending the 7.5% threshold or making it permanent.

Alternative minimum tax. This very unpopular parallel tax system has been reined in and will zap fewer Americans in 2018. The AMT started in 1982 as an effort to reduce loopholes open to ultra-high-income earners, but its net gradually spread and it affected more individuals. In the 1990s, Congress hiked the AMT tax rate, stiffening its cost. Under the AMT, the standard deduction and deductions for state and local income taxes are lost. With the new law, your exemption - the amount you can subtract from your AMT liability - is much larger. Previously, $54,300 was exempt for a single-filer and $84,500 for a married couple filing jointly. Respectively, the exemptions increased by almost a third, to $70,300 and $109,400.

Child tax credit. This actually is not a deduction against your income. It's a credit on your tax bill. A credit reduces your tax bill dollar for dollar. The credit for children under age 17 was raised to $2,000 from $1,000.

RESTRICTED DEDUCTIONS

State and local taxes. Lawmakers placed a $10,000 cap per return on deductions for state and local taxes (SALT). Till now, the amount you could deduct for SALT levies was unlimited. If you live in a place with high state and local taxes and home prices, you're hit hard. If you earn more than $100,000 in adjusted gross income and live in California, Connecticut, Maryland, New Jersey, New York or Oregon, you're very likely to see a material hike in your annual federal tax liability for at least the next decade.

Mortgage interest. You can continue to deduct this interest for first and second homes. The change: For mortgages dated after December 14, 2017, only the interest on the first $750,000 of debt is deductible. Before that date, the $1 million ceiling still applies. In places where home prices and, thus, mortgages, are low, that is not as much of a concern. In high-price locales, it is.

Home equity interest. You no longer can deduct interest paid on home equity loans, unless it is used to improve the dwelling. Many people use such loans, which are secured by their homes, to pay for college tuition or new cars. If a home equity loan and the mortgage totals more than $750,000, the amount over that limit can't be deducted.

ELIMINATED DEDUCTIONS

Personal exemption. Exemptions, which lowered your income by $4,050 per person - usually family members - are gone. For some families with children over 17, who can't take advantage of the expanded tax credit, the elimination of the personal exemption will be a net loss.

Alimony. For divorce and separation agreements made after 2018, alimony payments will no longer be deductible. The deduction is helpful to a paying ex-spouse who is short on funds.

Casualty and theft losses. If your house burned down or a crook took your wallet, you could deduct the loss not covered by insurance to the extent it exceeded 10% of your income. Under the new law, only casualty losses suffered in a natural disaster declared by the president are deductible.

Job expenses. Continuing education, medical tests and licensing fees previously were write-offs. Not anymore.

Moving expenses. Before, you could deduct these if you moved to start a new job and it was a good distance (that varies by circumstances, but typically meant 50 miles away) from your old home. Now, that is gone, unless you are in the military.

Tax prep. Depending on the complexity of the return, these fees can amount to more than $500. Uncle Sam no longer will let you deduct them, though.


This article was written by a veteran financial journalist. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation.



INDEX
  • A Guide To The New Rules On Tax Deductions In 2018
  • 2018 Estate Tax Changes And What May Be Ahead
  • You Don't Need Perfect Knowledge To Invest Well
  • What Are The 3 R's Of Roth IRAs?
  • Finding The Balance For Retirement Draw-Downs
  • Five Retirement Questions To Answer
  • Live Longer And Prosper In Your Golden Years
  • 6 Ways To Close The Retirement Gap
  • IRS Closes Valuation Loopholes
  • Passing Down IRA Assets? Clue In Family Members
  • This Type Of Trust Is A Failure
  • Grandparents Can Become Big Spenders For Their Offspring
  • Time Your Social Security Benefits For Top Results
  • Watch Out For These 7 Retirement Ups And Downs
  • Why Would Anyone Take Their RMDs Sooner?
  • 10 Frequent Retirement Mistakes You Should Avoid
  • Tax Rewards For Year-End Generosity
  • Meeting With The Family For Elder Care Planning
  • 20 Questions On Required Minimum Distributions
  • Tie The Knot For Retirement With A Spousal IRA
  • Four Retirement Planning Rules Of Thumb To Bend
  • When Will New College Grads Be Able To Retire?
  • Last Chance To File-And-Suspend Retiree Benefits
  • You Know You're Getting Old When You Get RMD Notice
  • 10 Steps To Take On The Path To Early Retirement
  • How To REALLY Get Ready For Your Retirement Years
  • Can You Skip Over The Special Tax For Generation-Skipping?
  • What Do You Think Your Life Will Be Like In Retirement?
  • Raiding A Roth Early? No Woes
  • Live Long And Prosper: Roll Out A Stretch IRA
  • Did The Devil Make You Do It? 8 Retirement Miscues
  • Ponder These 4 Reasons For Roth IRA Conversions
  • 10 Ways To Skirt A Penalty Tax On Plan Payouts
  • Why Give Securities To Charity Instead Of Cash?
  • Will You Have To Lower Your Sights In Retirement?
  • What Will $2 Million Get You In Your Retirement?
  • Figuring Out How Much You Need In Retirement
  • Should You Borrow Against A Life Insurance Policy?
  • How Will Your Retirement Distributions Be Taxed?
  • Five Ways To Plan Smarter And For The Long Haul
  • 5 Withdrawal Strategies For Retirement Savings
  • Five Ways To Plan Smarter And For The Long Haul
  • Generation X Members Have Retirement Work Cut Out For Them
  • Booted From A 401(k)? Don't Despair
  • It's Tough To Decide If You Should Retire Early
  • Saving For Retirement At All Ages
  • Which Type Of IRA Do You Prefer?
  • Owning REIT Shares Can Help Minimize Risk
  • Roundup Of New Estate Tax Changes
  • Here Are A Dozen Part-Time Jobs For Older Americans
  • Two More Important Choices For Retirement Living
  • Will Your Retirement Assets Last?
  • The Benefits Of Working With An Advisor
  • Setting Up A Roth IRA Through The ''Back Door''
  • Eight Of The Best Tax Strategies To Use In 2012
  • 10 ''Baby Steps'' To Take If You Are Newly Widowed
  • A Case Study: Retirement Planning In Your Fifties
  • Factors In Researching An Assisted Living Facility
  • New Wrinkle In Pre-59 1/2 IRA Withdrawals
  • A Case Study: Giving Wealth Away
  • Social Security's Online Benefits Estimating Tool
  • Estate Tax Exemptions Survive Longer
  • Will New Estate Tax Rules Lull You Into Inaction?
  • The Fine Art Of Planning For Collectibles
  • Five Tips To Manage Your 401(k) Wisely
  • A Comprehensive Way To Save For Your Retirement
  • Key Factors In Conducting Your 401(k) Vendor Search
  • Assessing The Damage To Pre-Retiree Financial Plans
  • Where Have Vacation-Home Prices Dropped The Most?
  • Giving Up Control Of Your Finances
  • Estate Tax Purgatory: How To Extricate Yourself
  • Cheap Thrills: 10 Ways To Enjoy Life In A Recession
  • Adjusting To The New Reality About Your Retirement
  • What Should You Spend First During Retirement?
  • Retirement Planning Does Not Stop When You Retire
  • Part-Time Job Hunting Tips for Retirees
  • Weighing The Benefits Of Investing In A Roth 401(k)
  • Keep A Leash On Part Of Your Estate
  • Pre-Retirees, Retirees Switch To Roth IRA
  • The Obama Bank Plan And The Risks It Poses
  • New Law Suspends RMDs For Just One Year
  • The Importance Of Year-Round Tax Planning
  • Charitable Giving Rules Changed By Pension Act
  • Market Gyrations Raise Questions For Pre-Retirees
  • Passing More Than Money To Your Heirs
  • How Many Years Should You Retain Your Tax Records?
  • Key Questions For Those Nearing Retirement
  • Retirement Planning Does Not Stop When You Retire
  • Dealing With Market Risk Right After Retirement
  • Nine Estate Planning Mistakes To Avoid
  • Family Foundation Lets You Do Good For Others And Yourself
  • Treating Your Retirement As A Liability
  • Beware Of Social Security Identity Theft
  • Regulatory Guidelines Update
  • Understanding the Importance of a Fiduciary Standard
  • Don't Forget About Roth 401(k)
  • Free Credit Reports Available Online
  • Energy Systems Scale and Timeline
  • The Oil Patch Profit Squeeze
  • Timber As A Liquid Investment
  • Timber Facts
  • Ethanol: Salvation or Panacea?
  • Timber Facts
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • Bank Loan Funds - A Primer
  • A Primer On Managed Futures
  • REITS: A Very Good Portfolio Diversifier, But Should You Invest In Them?
  • Does Investing Internationally Still Diversify Your Portfolio?
  • Another Way To View The Current Valuation Of REIT Sector
  • Understanding Risk-Preparing For The Unseen
  • A Critical View Of The Consumer Price Index
  • What Is Shorting Expense?
  • How Dangerous Is A Dollar Crash?
  • How Volatile Can The Stock Market Be?
  • GMO 7-Year Asset Class Return Forecast Is Bleak
  • Too Many ''Phish'' In The Sea
  • The Case For Industrial Metals
  • Identity Theft In The New Year
  • Ways To Improve The Score
  • Know The Score
  • Total Credit Market Debt (All Sectors) As % Of U.S. GDP
  • To Reinvest Or Not To Reinvest
  • Why Not Alternative Fixed Income Investments?
  • Just How Expensive Is The Market?
  • Beware of Brokerage Firms' Misconduct
  • Identity Theft : Correct Those Credit Reporting Errors
  • Risk-Controlled Investing
  • Q & A With Robert Arnott
  • Identity Theft : Applying For Credit? Better Check Your Credit Report First
  • Indentity Theft: Help Is On Its Way
  • Identity Theft: Everyday Prevention
  • Indentity Theft: Tips to Protect Yourself
  • Identity Theft : Tips to Protect Yourself
  • Identity Theft: A Note About Social Security Numbers
  • Identity Theft: Which Documents Should You Shred or Store?
  • Identity Theft : Don't Fall For That E-Mail!
  • Identity Theft : One More Reason To Protect Your Credit
  • What Do Rising Interest Rates Mean For Money Market Yields?
  • Exit Gracefully: How Business Owners Should Plan For A Comfortable Retirement
  • Section 529 Plans Are Popular But Not The Only Way To Go
  • The Importance Of Commodities In A Portfolio
  • A Tale Of Two Hedges
  • Bank Loan Funds: A Great Fixed Income Investment As Interest Rates Rise
  • REITs: A Great Diversification Investment
  • What Is Risk?
  • How To Find A Great Financial Advisor?
  • Is It Time To Find A New Financial Advisor?
  • Year-End Tax Planning Can Help Generate High Return On Investment
  • 4 Steps To A More Secure Investment Portfolio For Your Retirement
  • Traditional Investing May Decrease Your Retirement Lifestyle
  • Is Your 401(k) Plan A Failure?
  • Understanding Deflation
  • Tax Issues To Consider When Buying A Long-Term-Care Policy
  • Evaluating The Quality Of A Company's Earnings
  • Investing In Times Of Uncertainty And Risk: The Importance Of Diversification
  • Yesterday's Great Companies
  • A Retirement Plan Primer After The 2001 Tax Act
  • Beware Of Common Home Repair Scams
  • Estate Taxes To Be Reduced Then Repealed In 2010
  • Faulty IRA Conversions Can Lead To Tax Penalties
  • Many Individuals Pay Private Mortgage Insurance Beyond When It Is Necessary
  • Rethinking Estate Planning
  • Early Retirement Incentives For Tenured Faculty Waives Fica Tax Payment
  • Retirement Plan Contribution Limit Changes
  • Shopping For A Bank Account That Pays The Highest Possible Rate Of Interest
  • Your Medical File Report May Need A Check-Up
  • Do It Yourself Tax Preparers Watch Out: Tax Answers From IRS Centers Oftentimes Are Incorrect And/Or Insufficient
  • Five Tips For Preventing Thefts From Your Checking Account
  • Home Office Deductions: Hoops To Jump Through
  • Income Tax Effect On Single And Married Taxpayers
  • Income Tax Planning For Investments
  • Property Tax Challenges Should Not Be Overlooked
  • The IRS Will Follow Your Wealth To The Ends Of The Earth
  • Under New Law Taking Social Security at 65 Makes Sense for Most
  • When Do You Need Life Insurance
  • Year-End Tax Defferal Planning



  • ©2018 Legend Financial Advisors, Inc.®. All rights reserved.