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You might not want to hear this, but it’s already time to start thinking about tax preparation. Although April feels far away, the earlier you begin planning your tax filing, the more likely it is you’ll take advantage of all the tax breaks that tax year 2018 has to offer.
This is the first year the Tax Cuts and Jobs Act of 2017 will be in effect, and this act will likely affect you and your taxes. Many of the miscellaneous itemized deductions, including unreimbursed job expenses, have been repealed for the 2018 tax year. To make it easier for you to understand how you’ll be affected, GOBankingRates put together this list of tax deductions — including ones you might not know about — that you can still take advantage of. Medical and Dental ExpensesYou can deduct medical and dental expenses for yourself, your spouse and your dependents. However, you can only deduct the amount of your total medical expenses that exceed 7.5 percent of your adjusted gross income. Tax Preparation Fees (if You're Self-Employed)Whether you do your own taxes with a tax calculator or pay someone to do them, you can write off the fees on your miscellaneous tax deductions list — as long as you’re self-employed. Costs can include tax return preparation and electronic filing fees. Before the tax reform, anyone was eligible for this deduction, but it’s now only available to Schedule C filers. Home Renovation DeductionTypically, home renovation costs are not deductible on your tax return. If you make improvements to your home for medical purposes, however — such as adding wheelchair ramps or lowering cabinets for better accessibility — you can deduct those renovations as medical expenses. If the renovations are made to increase the value of your home, however, you can’t claim them as medical-related expenses. Local and State Sales TaxTaxpayers have the option of deducting state and local general sales taxes or income taxes they paid during the tax year, but not both. Under the new tax law, the deductibility of state and local tax payments for federal income tax purposes is now limited to $10,000 a calendar year. If you live in a state with no income tax, consider deducting state sales tax and local sales taxes that you paid. State, Local and Foreign TaxesYou can claim certain taxes as itemized deductions. Apart from state and local sales tax, you can also deduct:
Jury Duty PayIf you gave your jury pay to your employer because you were paid your salary while you served on a jury, you can deduct your jury pay from your taxable income. Volunteer Work DonationsYou can deduct certain expenses for charity work, like the cost of gas and oil if you use your car to get to and from the place you volunteer. If you don’t want to calculate the value per mile, you can deduct a standard rate of 14 cents per mile. You can also deduct the cost of purchasing and maintaining uniforms you wear to a place you volunteer or parking in a garage if that’s required. Just make sure you get documentation from the charity. Bad Debt DeductionIf you lent money that you never got back, it’s considered a bad debt, which might make you eligible for a tax rebate. Generally, to deduct a bad debt, you must have previously included the amount in your income or loaned out cash. You must also show that you attempted to collect the debt and that there’s no chance you’ll be able to recoup it. Moving Expenses for Military PersonnelPreviously, anyone who met the IRS distance and time tests after they relocated for a new job could take a moving-expense deduction. This deduction is suspended under the new law. However, the suspension does not apply to members of the military who move due to a permanent change of station. Airline Baggage Fees (if You're Self-Employed)If you’re self-employed and you travel for business, make sure you deduct your baggage fees. If you’re not self-employed, you won’t be able to make this deduction, so opt for an airline with low baggage fees. Mortgage Interest DeductionYou can deduct the interest you paid on loans of $750,000 or less, but if you’re married and filing separately, you can deduct the interest only on loans of up to $375,000. This marks a decrease from the previous year, when the limits were $1 million and $500,000, respectively. This new limit doesn’t apply if you had a binding contract to close on a home after Dec. 15, 2017, and closed on or before April 1, 2018. Mortgage PointsIf you itemize, you can deduct the points — or prepaid interest — you paid to purchase or build your primary home. Typically, if you can deduct all the interest you paid on your mortgage, you can also deduct all of the points. Home SaleIf you sold your home at a profit, you can exclude up to $250,000 of gains from your income. If you’re married and filing jointly you can exclude $500,000. Self-Employed Health InsuranceHealth insurance is tax-deductible for self-employed taxpayers. If you were self-employed in 2018, you can deduct premiums you paid for medical and dental insurance, as well as for qualified long-term care insurance. Gambling LossesGambling losses are one of the few itemized deductions that will remain intact for the tax year 2018. If you suffered gambling losses, you can deduct up to the amount of gambling income you reported. You can claim your losses as an “other miscellaneous deduction,” but be prepared to show proof of those losses. AlimonyIf you paid alimony as part of a divorce or separate maintenance decree, you can deduct the amount you paid. Your payments qualify as alimony if:
Car Registration Fees (if You're Self-Employed)If you meet certain requirements, you might be able to include some or all of your vehicle registration fees in your tax deductions. If part of your registration is deductible, you must itemize your deductions. This deduction — which previously applied to all employees — now only applies to those who are self-employed. Some Disaster LossesPrior to the change in tax laws, any loss or theft related to your home, household items or vehicles was tax deductible. However, deducting for personal casualty and theft losses is now suspended, unless the loss occurred in a federally declared disaster area. Military Reservist Travel ExpensesIf you travel more than 100 miles from your home as a military reservist, you can subtract travel expenses from the income you report on your tax return. Qualifying expenses include transportation, meals and lodging, with some exceptions. Health Savings Account ContributionsHealth savings accounts are tax-exempt accounts you use to pay or reimburse certain medical expenses. You can claim a tax deduction on contributions you or someone other than your employer made to your account.
Eddie R. Hernandez
1/3/2019 09:08:56 am
Thanks for the information, this is very helpful! Comments are closed.
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