November 23, 2018
End-of-Year Taxes: 7 Things to Consider
By Vance Albitz, CFP®
*2018 Itemized Deductions Updates:
- State and Local Tax Deduction (SALT). Under the TCJA, the deduction for all state and local taxes combined cannot exceed $10,000. These taxes include state and local income or sales taxes, real estate taxes, and personal property taxes. Limiting this one deduction might mean itemizing won’t make sense for many taxpayers.
- Mortgage and Home Equity Loan Interest Deduction. Mortgage interest remains deductible – with an important change: for mortgages taken out after December 14, 2017, only the interest on the first $750,000 of mortgage debt is deductible. If you took the mortgage out before this date, you won’t lose any of your interest deduction. Interest on home equity loans will no longer be deductible after 2017. This affects interest on all home equity loans used for purposes other than to improve the current home, even if the loan was taken out before December 15, 2017.
- Charitable Contributions Deduction. The TCJA enhanced the deduction for charitable contributions by raising the limit that can be contributed in any one year. The limit is now 60% of adjusted gross income, up from 50%.
- Medical Expense Deduction. Under prior law, taxpayers whose unreimbursed medical expenses exceeded 10% of their adjusted gross income (AGI) could deduct that excess. Under the TCJA, taxpayers may deduct unreimbursed medical expenses that exceed 7.5% of their AGI. This change has been made retroactive to January 1, 2017, and is effective for the 2017 and 2018 tax years.
- Job Expenses Deduction. Job expenses and miscellaneous itemized deductions subject to 2% AGI floor will no longer be deductible on Schedule A. This includes employee business expenses that were reported on Form 2106 such as vehicle expenses, travel expenses, meals and entertainment, job education, etc.
- Other Itemized Deductions. SALT, mortgage interest, and charitable contributions are among the most widely claimed deductions, but the list of itemized deductions allowable before 2018 was more extensive. Gone in 2018 are itemized deductions for unreimbursed employee expenses, tax preparation fees and other miscellaneous deductions.
For comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.