The Tax Cuts and Jobs Act made some major changes to the U.S. tax code when this tax reform law passed in 2017. Some of those changes are likely to save you money, including changes to tax brackets and tax rates. But the tax reform law also eliminated or reduced some popular tax breaks.
Because many of the law's provisions sunset in 2025, the loss of these tax breaks will affect you starting in tax year 2018 and continue for the next several years -- but your tax breaks will come back eventually unless the law is changed in the interim.
So which tax breaks can't you claim again for the next few years? Here are five of them.
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1. A deduction for personal exemptions
In 2017, taxpayers were able to claim a personal exemption of $4,050. Personal exemptions could be claimed for the taxpayer, spouses, and dependents. These personal exemptions acted as deductions, so your taxable income would go down for each exemption claimed. This would mean a family of four in 2017 was able to reduce taxable income by $16,200 thanks to these personal exemptions.
Starting in tax year 2018, personal exemptions disappear. While an expanded child tax credit and a higher standard deduction may make up some of the shortfall, this won't necessarily be the case for larger families who claimed many exemptions in the past. So if you've always claimed lots of personal exemptions, don't be surprised if your taxable income is higher in 2018.
2. Miscellaneous itemized deductions
Before tax reform, a number of deductions were grouped together under the category "miscellaneous deductions."
These included deductions for appraisal fees for charitable contributions; credit or debit card convenience fees; hobby expenses up to the amount of hobby income; unreimbursed job expenses; investment fees and expenses; and fees for tax advice. You could take this deduction only if all your miscellaneous deductions added up to at least 2% of adjusted gross income, and the IRS has a complete list of all of the "miscellaneous" deductions you could potentially claim.
You can no longer claim any of these miscellaneous deductions for tax years 2018 through 2025. If you previously got a tax break for all these little nuisance expenses incurred during the year, your taxable income will be a little bit higher for tax year 2018 and beyond.
3. Deductions for moving expenses
Under the old tax rules, taxpayers who relocated due to work could deduct the cost of their moving expenses from taxable income. These expenses had to be claimed on Form 3903, and certain requirements had to be met with regard to the timing of your move in relation to starting work and the distance you moved.
Now, if you relocate for your job, you're likely out of luck when it comes to a tax deduction. You won't be able to get a federal tax break no matter how much it cost you to move. However, there is a limited exception for members of the military who relocate and who meet specific requirements. Most taxpayers won't get to claim this deduction, though, unless they can postpone their move until after 2025.
4. A deduction for theft or losses due to certain casualties
If you're the victim of theft or suffered bad luck such as fire or flood damage to your home, you could previously be eligible for a deduction for some of the resulting losses not reimbursed by insurance. Starting in tax year 2018, though, Uncle Sam won't help you defray the cost of your losses unless the damage was caused by a federally declared disaster.
So if you live in a hurricane- or tornado-prone area and suffer unreimbursed property damage because of a declared disaster, you can still deduct for casualty losses in tax years 2018 to 2025. But if you just happen to have an isolated patch of bad luck, there's no tax break for you.
5. A deduction for alimony
Divorce may get a little more expensive starting in 2018 thanks to a change in the rules on taxes for alimony. Previously, a spouse who paid alimony to his or her ex got to take a tax deduction, and the recipient had to declare the alimony as taxable income -- as long as certain requirements were met, such as the recipient and payor living in separate households.
And if you got divorced before Dec. 31, 2018, this rule will continue to apply as long as your divorce settlement agreement was executed before this date.
For divorces that occurred after the new year, however, alimony payments aren't tax deductible any more. Since those who have to pay alimony typically have higher incomes than those who receive it -- and are thus taxed at a higher rate -- the loss of this deduction is likely to have a big financial impact. If you'd prefer the old rules to apply, you'll have to wait until after 2025 to get a divorce.
Understand the changes to the tax law
In addition to the loss of these deductions, you may find new limits on other deductions as well. For example, you could previously deduct the full amount of state and local taxes paid from your federal taxable income. But until 2025, this deduction is now capped at $10,000. For many taxpayers, this will mean a hefty federal tax increase, since a good portion of the income and property taxes they pay will no longer be tax deductible.
Of course, the tax reform law also came close to doubling the standard deduction, so many people who itemized and claimed some of these deductions in the past won't do so starting in tax year 2018 anyway.
Because so many changes were made, it's vital you understand how the Tax Cuts and Jobs Act will affect your tax return this year. Check out this guide to the 2018 tax changes to find out more about how your obligations to the IRS have shifted thanks to tax reform so you can be prepared before you file.
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