Under tax reform, many tax laws changed, including those affecting itemized deductions. While many people no longer need to itemize due to the nearly doubling of the standard deduction, certain taxpayers whose total deductions exceed the standard deduction may still want to consider itemizing. As a reminder, here is quick summary of how tax reform affected four itemized deductions used by many taxpayers in prior years:
1. Medical and Dental Expenses. Taxpayers can deduct the part of their medical and dental expenses that are more than 7.5 percent of their adjusted gross income.
2. State and Local Taxes (SALT). The law limits the deduction of state and local income, sales, and property taxes to a combined total deduction of $10,000. The amount is $5,000 for married taxpayers filing separate returns. Taxpayers cannot deduct any state and local taxes paid above this amount.
3. Home Equity Loan Interest. Taxpayers can no longer deduct interest paid on most home equity loans unless they used the loan proceeds to buy, build or substantially improve their main home or second home.
4. Miscellaneous Deductions. The new law suspends the deduction for job-related expenses or other miscellaneous itemized deductions that exceed two percent of adjusted gross income. This includes, among other things, unreimbursed employee expenses such as uniforms, and union dues.
If you have any questions or would like more information about itemized deductions after tax reform, don’t hesitate to call.