07 Jan 2018 Tax Changes – What You Need to Know!
Talk to Your Tax Advisor – It is always a great idea to talk with your tax professional before the end of the year to formulate a year end strategy. There may be some advice that they can give you to help you plan for the filing of your returns next year.
Mortgage Interest Deductions –
•Mortgage Debt incurred December 16, 2017 or later: You may deduct the interest paid on your mortgage up to a loan of $750,000. Any amount over that is not deductible.
•Mortgage Debt incurred prior to December 16, 2017: You may deduct the interest paid on your mortgage up to a loan of $1,000,000 which was the previous amount.
•Home-Equity Debt: Loan interest on Home Equity loans is suspended, unless you use the money to improve the home substantially and the total debt does not exceed its cost. Be sure to talk with your tax advisor prior to counting on a deduction for home improvement purposes.
Property Taxes – Previously, you could write off all your property real estate taxes. The new law limits that deduction to $10,000 which will affect those of you in high property tax areas. This deduction is either: Your property tax plus state and local income tax—Or, your property tax plus sales tax.
Child Tax Credits – If you have children under the age of 17 your tax credit has doubled from $1000 to $2000 per qualifying child.
Standard Income Deductions – Standard deductions doubled from $12,000 to $24,000 for married couples filing jointly. For some people this eliminated “itemized deductions” unless those itemized deductions exceed $24,000. Examples of itemized deductions are property taxes, mortgage interest and charitable deductions to name just a few.
Charitable Donations – Charitable Deductions remain in place, however, the limit for cash contributions increased to 60% of your adjusted gross income versus the previous 50%. Remember, that charitable deductions are considered “itemized” deductions.
Medical and Dental – Medical and Dental deductions are also “itemized deductions”. They are deductible if they exceed 7.5% of your adjusted gross income. However, in 2019, unless Congress acts, this will change to 10% of your adjusted gross income.
Personal Exemptions – Due to the higher standard deduction and higher child tax credit, personal exemptions are eliminated.
Miscellaneous Itemized Deductions – Miscellaneous deductions such as tax preparation, unreimbursed job expenses or investment expenses have been eliminated.
Tax planning is important to everyone and can influence your financial planning decisions. We are not tax professionals and you should not construe this information as tax advice. Always consult the advice of a licensed tax professional.