Archive for October, 2018:

Reminder on how the new Tax Law affects your 2018 deductions

Written on October 24th, 2018 by Jamesno shouts

As we near the end of 2018, here is a reminder of the major change for tax filers next year:

- The biggest item of the tax law change is the caps on itemized deductions that will move more people to use the “standard” deduction:

  • SALT taxes:  state taxes, property taxes, sales taxes are going to be capped at a combined $10,000 deduction on your schedule A.  This means if you are a high income earner that pays a lot of state tax or you pay a lot of property taxes, you will see a cap on total deductions which means higher income shown on your tax return.
  • Mortgage Interest:  interest on primary mortgages up to $1M is still grandfathered in for loans prior to 2018, loans taken out this year the interest will be capped on loans up to $750k
  • Charitable Deductions:  You can still deduct all charitable contributions, however if your charitable + mortgage interest + SALT taxes are less than $24k you will just use the Standard Deductions.
  • Misc Itemized Deductions:  These pretty much are eliminated, including moving expenses and unreimbursed job expenses (moving expenses still deductible for members of military).

Standard Deduction:

  • Single $12,000 / married $24,000
  • if over 65 add $1300 to that deduction
New Tax Credit:
  • kids under 17 you get a child tax credit of $2000 each.  A credit is a dollar for dollar reduction in taxes owed.

Personal Exemptions:

  • These have gone away with new tax law, sort of replaced with that Child Tax Credit above

Summary:

Unless you have a lot of mortgage interest and charitable contributions, odds are you will now just do a standard deduction.

NOTE:

If you are over 70 1/2 and required to do RMD’s, and you make charitable contributions but will fall into the standard deduction category – consider making your charitable contributions direct from your retirement account (IRA).  These will go towards your RMD requirement and not be taxable as income when sent direct from your IRA.

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