The new tax reform bill is now law, and taxpayers can expect a lot of changes to take place in 2018. Reduced tax rates, higher standard deductions, and higher child tax credits for families are just a few of the perks that individual taxpayers will see next year.
Continue Reading Below
To pay for these tax breaks, however, lawmakers took away many deductions that millions of taxpayers had used every year to reduce their tax bills. The nine deductions we'll discuss are just some of the popular provisions that will disappear, and taxpayers will have to look closely at their own personal situations to see whether other, less common deductions are also going away.
1. Personal exemptions
The biggest move that the tax reform bill made was to take away personal exemptions, which generally allowed taxpayers to reduce their taxable income by $4,050 per person. Many policymakers argued that the personal exemption was essentially merged into the standard deduction, but the rise in the standard deduction under tax reform wasn't large enough to compensate for the loss of personal exemptions for some taxpayers.
2. Home equity loan interest
Mortgage interest on purchase loans is still deductible under tax reform up to $750,000, but the deduction for interest on home equity loans becomes nondeductible once 2018 begins. Unlike with purchase loans, there's no grandfathering provision for existing home equity loans, so for those for whom the deduction is important, looking at potentially repaying those loans sooner than expected might be worth considering.
Continue Reading Below
3. Moving expenses
Taxpayers won't be allowed to deduct moving expenses, as they can for 2017. To be deductible, a move had to be motivated by a job change, with the new job being at least 50 miles further from where you used to live than your old job was. The best thing about the moving expense deduction was that you didn't have to itemize deductions to get it, but it will be gone for 2018 and beyond.
4. Casualty and theft losses except in disaster areas
Casualty losses under old law were eligible as itemized deductions to the extent that they exceeded $100 plus 10% of your adjusted gross income. Events included not only natural disasters but also fires, robberies, and other qualifying occurrences. The new law now preserves the deduction only for disasters for which a presidential disaster area declaration was made.
5. Job expenses
Money you spent on certain job costs, such as license and regulatory fees, required medical tests, and unreimbursed continuing education, was available as an itemized deduction to the extent that it and other miscellaneous deductions exceeded 2% of your adjusted gross income. Now, you won't be able to deduct these costs anymore, making it even more worth your while to try to get your employer to pay them on your behalf.
6. Subsidized parking and transit reimbursement
Employees were eligible under old tax law to get up to $255 per month from their employers to subsidize parking costs or transit passes. Workers didn't have to include those perks in income, and companies could deduct it. Now, the corporate deduction for that cost will go away, and that could lead some businesses to stop offering those programs to workers.
7. Alimony payments
The old tax law distinguished alimony payments from maintenance and child support, with the paying ex-spouse getting to deduct alimony from taxable income while the receiving ex-spouse had to include it. That treatment will go away in 2018, with no tax impact for the payer or recipient going forward.
8. Tax preparation fees and other miscellaneous deductions
Just like job expenses, costs to have your taxes done were also available as miscellaneous itemized deductions. That won't be the case anymore, and a host of other miscellaneous deductions subject to the 2% AGI limitation will all be gone.
9. Donations to colleges in exchange for athletic event seats
One controversial provision allowed donors to give money to colleges and deduct the full amount, even if they got back tickets or seating rights to athletic events. That perk will go away, and donors will have to reduce their deductions by the value of those tickets.
One last chance
If you have any of these deductions, do what you can to get them into the 2017 tax year. That way, you can claim them one last time before they're no longer available in 2018.
The $16,122 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.