The Trump administration touted the Tax Cuts and Jobs Act (TCJA) as tax reform that led to savings for most taxpayers. Although taxpayers will experience a doubled standard deduction and higher tax credits, there are some things that were taken away that may also impact your future tax returns.
One example: deductions.
The TCJA removed many deductions. Three popular examples include:
- Home equity loan interest. Taxpayers often use home equity loans to fund the cost of a child’s college education and other expenses. In exchange for taking out this loan, the taxpayer could deduct the mortgage interest. The TCJA has tightened the rules for this deduction. The deduction is now only available if the taxpayer uses the loan for the purchase or improvement of a home. The law also resulted in a cap on the loan. Deductions are only available on loans of $750,000 or less.
- Moving and job expenses. Taxpayers that needed to move for their job or purchase tools, equipment as well as take classes or tests are no longer able to deduct these expenses for their tax returns.
- Transit reimbursement. Taxpayers can also no longer take deductions for transportation or parking costs connected to employment.
The TCJA also removed the personal exemption deduction. This deduction resulted in the deduction of $4,500 for each member listed on the return. This meant families could claim the deduction for both parents and each child. Thus, families with two or more children generally lose out on additional tax savings provided by this deduction.
These changes can make navigating one’s tax returns difficult in 2018. A failure to abide by the new rules could result in questions from the Internal Revenue Service (IRS). In the event these questions lead to an audit, it is wise to seek legal counsel to protect your interest.