It’s the time of year when tax professionals are advising their clients to start thinking about tax preparation. It may seem premature – April is months away – but the advice is sound. It’s the first year that the Tax Cuts and Jobs Act will be in effect with many changes for individual filers. The earlier you begin prepping for your 2018 tax filing, the easier it will be for you and your tax professional to find your tax savings in the new law.
It’s true that many itemized deductions, including unreimbursed job expenses, have been repealed for the 2018 tax year. However, there are many popular tax deductions still available, including some that you might not know about. Here are ten of them.
1. Medical and dental expenses
You can deduct the amount of your total medical expenses for yourself, your spouse and your dependents that exceed 7.5 percent of your adjusted gross income.
2. Health savings account contributions
If you use a health savings account to pay certain medical expenses, you are eligible for a tax deduction on contributions you made to your account.
3. Medical – related home renovations
Most home renovation costs are not deductible on your tax return. However, if improvements are made to your home for medical purposes – such as wheelchair ramps and accessibility changes in kitchens and bathrooms - you can deduct those renovations as medical expenses.
4. Mortgage interest deduction
The interest deduction on new mortgages is limited to loans of $750,000 or less unless you’re married and filing separately, the limit is $375,000. Previously the limits were $1 million and $500,000, respectively.
5. Home sale
If you sold your home at a profit, you could exclude up to $250,000 of gains from your income. Married joint filers can exclude $500,000.
6. State and local taxes
The deduction for state and local taxes (SALT) related to property and sales taxes, on federal IRS tax returns is being limited to $10,000. Taxpayers will still need to itemize for this deduction but will have a cap of $10,000 for 2018 where previously there was no limit.
7. Volunteer work donations
Certain expenses for charity work, like the cost of gas and oil and parking fees, are deductible if you use your car to get to and from the place you volunteer. You will need documentation from the charity.
8. Gambling losses
As in previous years you can deduct gambling losses that don't exceed the amount of gambling income reported as long as you have proof of the losses.
You can deduct up to $4,000 in qualifying higher education tuition and fees paid for yourself, your spouse or a dependent. However, if you're married but filing separately, you don't qualify for this deduction.
10. Student loan interest deduction
You can deduct the lesser of $2,500 or the amount of student loan interest you actually paid during the tax year. This deduction is not eligible to married couples who file separately.
While many itemized deductions have been suspended starting with the 2018 tax year, the standard deduction has increased. It's now $24,000 for married couples filing jointly and for qualified widows and widowers. For single filers and married couples filing separately, the deduction is now $12,000. If you file as head of household, you can deduct $18,000.
There are numerous other changes to the tax law that will affect individual filers in 2019. For more clarification of the specific deductions, you should consult with your tax advisor and update your tax planning as part of your long-term financial plan.
Charles P Myrick CPA offers tax preparation for individuals using a process that combines smart, personalized planning with annual tax preparation and filing. Our job is to help you know about all the available tax opportunities that meet your individual needs and circumstances. We work closely with tax lawyers, and investment advisors to ensure that all the details are legally sound, technically accurate, and working to your maximum benefit. Contact us to learn more: (202) 789-8898