As we get closer to the end of 2018 there are new rules taxpayers should be aware of when it comes to tax reform. For 2018, the standard deduction amount has been increased for all filers and there are new rules regarding what you can/cannot itemize.
Standard deduction amount increased. For 2018, the standard deduction amount has been increased for all filers, and the amounts are as follows.
- Single or Married Filing Separately—$12,000.
- Married Filing Jointly or Qualifying Widow(er)—$24,000.
- Head of Household—$18,000.
Because of this change, many taxpayers are considering filing a new Form W-4 with their employer.
Deduction for personal exemptions suspended. For 2018, you can’t claim a personal exemption deduction for yourself, your spouse, or your dependents.
Changes to itemized deductions. For 2018, the following changes have been made to itemized deductions that can be claimed on Schedule A.
- If your adjusted gross income is over a certain amount you no longer need to worry about your itemized deductions being limited.
- You can deduct the part of your medical and dental expenses that is more than 7.5 percent of your adjusted gross income.
- Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).
- Say goodbye to job-related expenses or other miscellaneous itemized deductions that were subject to the 2 percent of AGI floor. You may still deduct certain other items on Schedule A, such as gambling losses.
- For indebtedness incurred after December 15, 2017, the deduction for home mortgage interest is limited to interest on up to $750,000 of home acquisition indebtedness. This new limit doesn’t apply if you had a binding contract to close on a home after December 15, 2017, and closed on or before April 1, 2018, and the prior limit would apply.
- Think again if you will be banking on using your interest on home equity loan. That will no longer be deductible, which means indebtedness not incurred for the purpose of buying, building, or substantially improving the qualified residence secured by the indebtedness.
- The limit on charitable contributions of cash has increased from 50 percent to 60 percent of your adjusted gross income.