The new Tax Cuts and Jobs Act is the most sweeping tax reform, or deform, depending on your views, in a very long time. If you haven’t read my articles in the two previous months, you may want to do that.
In this article, I’m providing a quick run-down of some additional changes to the tax laws:
There is now a limitation on the deduction of mortgage interest on home indebtedness of $750,000 ($375,000 for married filing separate tax payers), down from $1 million dollars under the old law. However, for tax years after December 31, 2025, the prior $1 million ($500,000 for married filing separate) will be restored. Also, the new lower limit doesn’t apply to any acquisition indebtedness incurred before December 15, 2017.
There’s bad news for those of you with 2nd mortgages, interest paid on home equity loans is suspended for the 2018 through 2025 tax years but, it too is slated to be restored in the 2026 tax year.
The medical expense deduction threshold is temporarily reduced back down to 7.5% of adjusted gross income for all taxpayers but, the alternative minimum tax limits of 10% won’t apply in the 2018 tax year.
Charitable contribution deduction limits have now been increased to 60% for cash contributions to public charities and certain private foundations and any amount over the 60% limitation can generally be carried forward and deducted for up to five years.
Payers of alimony and separate maintenance agreements will no longer be able to deduct their payments and the recipient spouse will not have to claim these payments as income. This is for any divorce or separation agreement executed after December 31, 2018 even if modified after this date.
Another hit to certain taxpayers will be the disallowance of miscellaneous itemized deductions for the 2018 through 2025 tax years. This includes deductions such as tax preparation fees, unreimbursed employee business expenses and some investment advisory costs.
The repeal of the Obamacare Individual mandate beginning in 2019 is another big change. This will reduce the shared responsibility payment to zero for taxpayers who do not have minimum essential health insurance. I don’t think, under the current administration, this is a real surprise to anyone.
Come back next month for more information on the new tax law. You can also visit my website at actservices-inc.com.
