CHANGES TO THE TAX LAW- WHAT YOU NEED TO KNOW.
THE PERSONAL EXEMPTION
Last Year, everyone could claim this deduction in the amount of $4,050. For household of 2 or more, along with the Taxpayer each qualifying person listed on the tax return would also receive a $4050 deduction. Therefore, if you are single you could have claimed one personal exemption. If you are married with 2 children you could have claimed 4 personal exemptions. In 2018 you will no longer be able to claim the personal exemption.
Last year the Standard Deduction for a single person was $6,350 and for a Married filing joint couple it was $12,700. For 2018 the Standard Deduction for a Single person has been raised to $12,000 and for Married Couples it has been raised to $24,000. Many people who previously itemized their State and Local Taxes, Property Taxes, Mortgage Interest will not have enough to itemize their deductions and will be filing there return with the new higher Standard Deduction.
CHANGES IN ITEMIZED DEDUCTIONS
You will now only be able to claim up to $10,000 TOTAL of your State and Local Taxes along with you Real Estate Property Taxes. Therefore, if your Property Taxes are $12,000 and the State and Local Taxes from your W2’s is $3000. You will only be able to claim a maximum of $10,000 in total.
There has also been changes regarding Home Equity Loans. For newly originated Home Equity Loans the interest is tax deductible only if the loan is used for home improvement. If the Home Equity loan is used for other purposes such as college tuition, debt consolidation, investment etc., you will not be able to deduct the Home Equity Loan Interest. There is also a new cap that limits the deductibility of mortgage interest up to $750,000 of debt. Many homeowners with existing mortgages and home equity loans that were originated prior to 2018 will not be affected because the prior-law-rules are still in place.
Changes in Miscellaneous deductions. Job related business expenses, tax prep fees and investor advisory fees are no longer tax deductible.
OTHER IMPORTANT CHANGES
- CASUALTY AND THEFT LOSSES – Prior to the new tax law, If you had uninsured losses due to fire, floods or other disasters you were able to take a Casualty Loss deduction. Under the New Law you can only take a Loss if the property damaged is areas which are under presidential declaration as a disaster area.
- MOVING EXPENSES– After meeting the IRS guidelines relating to moving for a new Job. You were able to take Moving Expenses. This deduction has been eliminated except for members of the military on active duty.
IF YOU LIVE IN NEW YORK STATE, THE STATE HAS DECOUPLED FROM THE FEDERAL GOVERNMENT WITH THE TAX LAW CHANGES THIS MEANS YOU STILL MAY BE ABLE TO ITEMIZE YOUR DEDUCTIONS ON NEW YORK STATE TAX RETURN.
There are many other complex changes to the tax law. Now more than ever it is necessary to seek the guidance from an accountant.
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