Last tax season, many taxpayers found it to be more beneficial to take the standard deduction and forgo itemized deductions due to tax law changes. Then again, some felt their expenses exceeded standard deduction amounts. This year, we advise all taxpayers to take a hard look at their expenses to determine whether taking a standard deduction or itemized deduction is the better choice.
Medical and dental expenses
If your expenses in these categories are more than 10% of your adjusted gross income, you will receive a deduction.
State and local taxes
You will not be able to deduct state and local income, sales and property taxes if your deductions exceed $10,000 ($5,000 for married taxpayers filing separate returns).
Home equity loan interest
You can not deduct interest that you paid on home equity loans unless you took out the loan to buy, build or substantially improve your property.
The limit on charitable contributions of cash has increased from 50% to 60% of your adjusted gross income, so you may be able to deduct more of your charitable cash contributions.
Deduction for casualty and theft losses
Net personal casualty and theft losses are deductible only to the extent that they are attributable to a federally declared disaster. You can elect to deduct the casualty loss in the tax year immediately preceding the tax year that you incurred the disaster loss.
There is no deduction for use of an automobile as part of a move. However, if you are a member of the U.S. Armed Forces on active duty and move because of an order, and you don’t get reimbursed by the government for the expense, you can deduct it from your taxes. If you had to move for work other than the armed services and your employer reimbursed you, count that money as taxable income.
Alimony and separate maintenance payments are no longer deductible for any divorce or separation agreement executed after December 31, 2018. Note that alimony and separation maintenance payments are no longer included as income, so you will not need to report these payments on your tax return.
We advise against deducting any job-related expenses that exceeds 2% of your adjusted gross income. Included are such unreimbursed employee expenses as uniforms, union dues and the deduction for business-related meals, entertainment and travel.
You may be able to deduct more of your total itemized deductions if your itemized deductions were limited in the past due to the amount of your adjusted gross income. The old rule that limited the total itemized deductions for certain higher-income individuals has been suspended.
If you qualify for tax deductions, they can be huge money-savers. If you do not qualify, use the new higher standard deductions. And of course, new laws, regulations and interpretations can make subtle but important differences, so consult regulations and your tax advisor as you approach the next filing date.