Deductions

Personal exemption deductions for yourself, your spouse, or your dependents have been eliminated beginning after December 31, 2017, and before January 1, 2026.

For 2018, the standard deduction amount has nearly doubled for all filers.

Withholding

Due to the Tax Cuts and Jobs Act, many taxpayers’ withholding went down in 2018, giving them more money in their paychecks. Some taxpayers may receive a smaller refund or even owe an unexpected tax bill when they file their 2018 tax return next year.

Take these actions:

·         Do a paycheck checkup to help decide if you need to adjust your withholding or make estimated or additional tax payments now.

·         Submit a new Form W-4, Employee’s Withholding Allowance Certificate to your employer to change withholding.

·         Make estimated or additional tax payments if the withholding from your salary, pension or other income doesn’t cover the 2018 income tax that you’ll owe for the year. Form 1040-ES, Estimated Tax for Individuals also has a worksheet to help you figure your estimated payments.

Get ready for your refund

The new tax law may affect the refund you expect. If you claim the Earned Income Tax Credit or Additional Child Tax Credit, the IRS cannot issue refunds before mid-February.

Get ready to file

The 2018 Form 1040 is a redesigned form and replaces Forms 1040A and 1040EZ.

If you file electronically, you will need your 2017 Adjusted Gross Income (AGI) to sign your return. If you’re using the same tax software you used last year, you will not need to enter your prior year information to electronically sign your 2018 tax return. 

Deduction for personal casualty and theft losses suspended (unless incurred in federally-declared disaster area)

Limitations to the deduction for state and local taxes.

Limitations to the deduction for home mortgage interest in certain cases

Eliminating most miscellaneous itemized deductions such as:

·         Deductions for employee business expenses

·         Tax preparation fees

·         Investment expenses, including investment management fees

·         Employment related educational expenses

·         Job search expenses

·         Hobby losses

·         Safe deposit box fees

·         Investment expenses from pass-through entities

Eliminated the limitation on itemized deductions for certain high-income taxpayers. 

The deductibility of state and local tax payments for federal income tax purposes is now limited to $10,000 a calendar year.

A taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive. 

The deduction for moving expenses has been suspended for most taxpayers for tax years beginning after Dec. 31, 2017 through Jan. 1, 2026. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.

However, employers may exclude from wages any 2018 reimbursements to or payments on behalf of employees for moving expenses incurred for a move that took place prior to January 1, 2018, and which would have been deductible had they been paid prior to that date. See Notice 2018-75 for more information.

Some laws regarding depreciation deductions have changed. A taxpayer may elect to expense the cost of any section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million.

Alimony and separate maintenance payments are no longer deductible for any agreement executed or modified after December 31, 2018.

Credits

For 2018, the maximum credit has increased and the income threshold at which the credit begins to phase out has increased.

Each child must have a Social Security number before the due date of your 2018 return (including extensions) to be claimed as a qualifying child for the child tax credit or additional child tax credit.

A new credit of up to $500 may be available for each dependent who does not qualify for the child tax credit.