How the Tax Cuts and Jobs Act Tax Affects Itemized Deductions

Due to the TCJA or recent tax reform, in addition to nearly doubling standard deductions, several itemized deductions that can be claimed on Schedule A, Itemized Deductions have changed.

Many individuals who formerly itemized may now find it more beneficial to take the standard deduction.

Here are some of the changes to Schedule A for 2018:

Deduction for state and local income, sales and property taxes modified
A deduction for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 or $5,000 if married filing separately. Anything above this amount is not deductible.

Deduction for home equity interest modified
Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build or substantially improve a main home or second home. For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not.

Limit for charitable contributions limited on the deduction for charitable contributions of cash has increased from 50 percent to 60 percent of a taxpayer’s adjusted gross income. This means that some taxpayers who make large donations to charity may be able to deduct more of what they give this year.

Deduction for casualty and theft losses modified to only include federally declared disasters.

Miscellaneous itemized deductions exceeding 2 percent of adjusted gross income are no longer deductible.
This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. It also includes deductions for tax preparation fees and investment expenses, such as investment management fees, safe deposit box fees and investment expenses from pass-through entities.

If you have itemized deductions in the past, you many see a change on your 2018 return.  This can have a huge impact on your overall taxable income and you may not benefit from itemizing deductions as you had in the past.


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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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