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12 Tax Deductions That Have Disappeared News 

12 Tax Deductions That Have Disappeared

THE TAX CUTS AND JOBS Act of 2017 made major changes to the tax code and were a mixed bag for some households. While the standard deduction nearly doubled and the child tax credit increased, many other deductions and credits were eliminated.

Not much will be changing for the 2020 tax year though. “There’s a lot of confusion about the stimulus package,” says Greg Hammer, president of Hammer Financial in Schererville, Indiana. However, the provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act shouldn’t impact tax deductions for consumers. People shouldn’t have to worry about government stimulus payments being counted as income either. “Essentially, the intent was to give people the money,” according to Hammer.

While some crucial tax breaks might return after portions of the tax law expire in 2025, here are 12 tax deductions that disappeared in 2018 and won’t be available this spring:

  • 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.
  • Charitable donation deductions for some taxpayers.

1. Standard $6,350 Deduction
Some of the best news from the tax reform law was an increase in the standard deduction. “The overall effect of the tax reform was that most taxpayers were better off using the standard deductions rather than itemizing their deductible expenses,” says Daniel Laginess, CPA and managing partner at Creative Financial Solutions in Southfield, Michigan.

While single taxpayers were only eligible for a $6,350 standard deduction in 2017, that amount nearly doubled in the 2018 tax year to $12,000. For 2020 filings, the standard deduction for individuals is increasing even further to $12,400. Married couples will get a standard deduction of $24,800 when they file tax forms this spring, and head of household filers are entitled to deduct $18,650.

“The amount of people who are eligible for (itemized) deductions has really dropped,” says Timothy McGrath, managing partner for Chicago-based Riverpoint Wealth Management. Unless someone is a homeowner with significant mortgage interest, a standard deduction will likely result in greater tax savings compared to itemizing.

2. Personal Exemptions
The increased standard deduction was welcome news for many households, but there was a trade-off. It eliminated several previously allowed deductions and the personal exemption for taxpayers and dependents, Laginess says.

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.

3. Unlimited State and Local Tax Deductions
State and local taxes have long been one of the largest write-offs for those who itemize deductions. Known by the acronym SALT, they can still be deducted but are capped at $10,000 per year. The limit is particularly detrimental to those living in states like California and New York, which both have above-average state income tax and property tax rates. “There are a lot of high earners who aren’t getting much of a deduction with a cap of $10,000 per year,” McGrath says.

4. $1 Million Mortgage Interest Deduction
Another change that disproportionately affects those living in states such as California and New York is the restriction on the amount of mortgage interest that can be deducted. In 2017, married taxpayers could deduct interest on a mortgage of up to $1 million. Starting with the 2018 tax year, only interest on mortgage values of up to $750,000 are now deductible.

5. Unrestricted Deduction for Home Equity Loan Interest
The Tax Cuts and Jobs Act also eliminated 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 home equity 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% of their adjusted gross income in 2017. “(Some workers) used to have big write-offs,” says Paul Axberg, a CPA and president of Axberg Wealth Management, an Arizona-based tax, financial and retirement planning firm…..Read More>>

Source:- usnews

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