Tax Man LLC

Tax Changes 2018

Other Changes to Itemized Deductions

You’ve probably heard (wrongly) that there are “no more deductions.”   

Time for some more truth serum.

What didn’t change:

  • Charity
  • Medical Expenses
  • Gambling losses (up to winnings)
  • Investment Interest (up to investment income)

What got limited(details below):

  • Property tax, sales tax, DMV, state income tax (up to $10,000 total which easily covers most folks)
  • Mortgage interest on acquisition loans (up to a $750,000 mortgage which easily covers most folks) - But see the next episode (this one’s a bit complex)

What got taken away:

  • Non-acquisition mortgage debt
  • Line 27 of Schedule A:
    • Employee business expenses
    • Investment expenses

More specifically:
SALT (state and local taxes) are limited to $10k:  If you have more than $10,000 in state income tax, sales tax, DMV and property taxes on real estate, you cannot deduct the excess.  Relatively few of you will have this problem.  And those of you that do hit the $10,000 limit will likely find the lower tax rates will help far more than this limitation hurts.

Mortgage Interest: Stay tuned for Episode 7

Employee Expenses: Prior to 2018 you could deduct unreimbursed business expenses as an employee if they were high enough.  But those are gone for 2018.  If you get reimbursed your business expenses those normally stay tax-free.  It’s only those out of pocket payments that are affected.  
So say goodbye to:

  • Union dues
  • Uniforms
  • Tools, boots, safety equipment
  • Unreimbursed employee expenses such as:
    • Entertainment
    • Mileage
    • Cell phone for work
    • Internet for work
    • Business gifts
    • Travel

​​Please notice that these are only eliminated for employEEs.  If you are self-employed or have a corporation or LLC tax return those deductions still exist and are basically unchanged.

Investment Expenses:  Also gone are deductions for:

  • Investment expenses 
  • Stock and investment advisory fees
  • Financial and estate planning fees
  • Legal expenses related to taxes and/or employment disputes
  • Tax preparation fees (Sorry!)These may still be available on a business return, but not on a personal return.

On a side note, removing these deductions doesn’t break my heart, since most of my audits in the last few years have been on these issues.  Rarely do I get audit on mortgage interest, SALT or charity.

Randall S. van Reken, EA, CFP, ATP