Please keep in mind, we are not tax experts which is why we provide links to the resources used so you can take a look yourself.
A change worth noting off the top, because the standard deduction is now $12,000 ($18,000 married filing joint), anyone making that amount or less do not necessarily have to file a tax return. This is significant for many people. For example:
- Anyone making $5.76/hr or less who works 40 hours ($8.65/hr combined wage for married/joint).
- Anyone making $11.54/hr or less who works 20 hours ($17.31/hr combined wage for married/joint).
Because the standard deduction is so high, it will take a lot more expenses in order to itemize now.
Let’s take a run down through some of the more popular itemized deduction and changes which effect them.
A new section was added (Section 170(b)(1)) in regards to an increased limitation for cash contributions.
“(i) IN GENERAL.—In the case of any contribution of cash to an organization described in subparagraph (A), the total amount of such contributions which may be taken into account under subsection (a) for any taxable year beginning after December 31, 2017, and before January 1, 2026, shall not exceed 60 percent of the taxpayer’s contribution base for such year.
“(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the applicable limitation under clause (i) for any taxable year described in such clause, such excess shall be treated (in a manner consistent with the rules of subsection (d)(1)) as a charitable contribution to which clause (i) applies in each of the 5 succeeding years in order of time.
Medical Expense Deduction
A temporary reduction in medical expense deduction floor rule which was in effect until the end of 2016 was extended to 2019. The special rule raised the floor from 7.5 % to 10%. So this really isn’t a change, but an extension of a previous amendment.
There was also a change to the “56. Adjustments in computing alternative minimum taxable income section” (Section 56(b)(1)(B)) in regard to medical expenses. In regard to Medical Expenses, the section used to read:
In determining the amount allowable as a deduction under section 213, subsection (a) of section 213 shall be applied without regard to subsection (f) of such section.
But the following was added:
This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019
Qualified Tuition Programs
Under this section Section 529(c) a few new paragraphs were added in regard to elementary or secondary public, private, or religious schools which recognizes them as qualified higher education expenses.
(2) LIMITATION.—Section 529(e)(3)(A) is amended by adding at the end the following: “The amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary during any taxable year shall, in the aggregate, include not more than $10,000 in expenses described in subsection (c)(7) incurred during the taxable year.”.
Personal Exemptions (Section 3402(a)(2)) have been nixed. Accordingly, wage withholding will change as well. Instead of “the amount by which the wages exceed the number of withholding exemptions claimed multiplied by the amount of one such exemption” it will now be “the amount by which the wages exceed the taxpayer’s withholding allowance, prorated to the payroll period.”
There are several other’s places which have been effected by this change as well. If these interest you, take a look at them in the bill it’s self.
Deduction for Taxes
New paragraphs were added to the section (section 164) the gist (not the whole):
- foreign real property taxes won’t count
- not to exceed $10,000 ($5,000 in the case of a married individual filing a separate return).
Qualified Residence Interest
A new subparagraph (Section 163(h)(3))was added:
- Disallowance of home equity indebtedness interest
- Limitation on acquisition indebtedness was raised from $750,000 ($375,000) to $1,000,000 ($500,000).
- Dot apply to any indebtedness incurred on or before December 15, 2017. For a taxpayer who enters into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, substitute ‘April 1, 2018’ for ‘December 15, 2017’.
- Miscellaneous Deductions are suspended (Section 67).
- Limitation of itemized deductions has been suspended (Section 68). Limitations used to be
- $300,000 in the case of a joint return or a surviving spouse
- $275,000 in the case of a head of household
- $250,000 in the case of an individual who is not married and who is not a surviving spouse or head of household
- $150,000 in the case of a married individual filing a separate return.
- Exclusion from gross income for qualified bicycle commuting reimbursement has been suspended (Section 132(f)).
- Exclusion from gross income for qualified moving expense reimbursement has been suspended (Section 132(g) ).
- Deduction for moving expenses has been suspended (Section 217) except for members of the Armed Forces.
- Wagering Losses has the following added (Section 165(d)). ” includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.”
- There is a repeal on deduction for alimony payments.
- Increase in Estate and Gift Tax Exemptions (Section 2010(c)(3)). The basic exclusion amount was $5,000,000, now it is $10,000,000.
- Shared responsiblity payment for individuals failing to maintain minimum essential coverage has been eliminated (Section 5000A(c)). Read between the lines Obamacare/Affordable Care Act penalty. Note however, this applies to months beginning after December 31, 2018
There you have most of them.
Tax information sources:
Read Part 1: Tax Brackets, Taxable Income, Standard Deduction; Child Tax Credit; Taxed Owed