Tax Reform: Changes You May Have Overlooked

With the passing of the Tax Cuts and Jobs Act, there were some changes made during tax reform that were not as publicized as the C-corporate rate decreasing or the new qualified business income deduction. Here are a list of changes you may have overlooked.

The following provisions are applicable from 2018 to 2025:

Moving Expenses:

These are no longer deductible. There are exceptions for members of the military. If you are an employer who offers to “reimburse” moving expenses, you will have to pay the employee through payroll as a bonus to receive a deduction for it.

Child Tax Credit:

This has doubled to $2,000 for children under 17. There are still phase outs of the credit, but you will benefit if you are a single filer making $200,000 or less or married making $400,000 or less. This can be a refundable credit up to $1,400 per qualifying child.

Medical Expenses:

These are still deductible but are limited to medical expenses that exceed more than 7.5% of adjusted gross income, which was a favorable change. Over the past few tax years, this deduction was limited to 10% of adjusted gross income. Keep in mind that the 10% limit still holds for the alternative minimum tax calculation. This is only effective for years 2017 and 2018.  After 2018, the threshold increases to 10% for both regular and AMT.

Non-Child Dependent Credit:

This is a temporary non-refundable credit that would allow a taxpayer to take a $500 credit for any non-child dependent (e.g., child over 17, elderly parent) that they are supporting.

Personal Casualty Loss Deduction:

Losses due to a disaster are only deductible if the loss was incurred in a federally declared disaster area that is declared by the president. The deduction is still listed under itemized deductions, but it is limited to amounts not reimbursed that exceed 10% of the taxpayer’s adjusted gross income. The $100 per casualty loss is still in effect as well.    

Job Expenses and Certain Miscellaneous Deductions (e.g. deductions limited to 2% of Adjusted Gross Income):

This has been completely eliminated starting in tax year 2018. This eliminates the deduction for unreimbursed employee expenses (e.g. job travel, union dues, job education). This also eliminates other deductible expenses (e.g. investment advisory fee, safe deposit box and tax preparation).

The following provisions are applicable in 2018 without expiration:

Student Loan Interest Deduction:

This popular deduction (up to $2,500) remains in full effect. It is still subject to phase out limitations, if you are a single taxpayer earning more than $80,000 or a couple earning more than $165,000 you will not qualify for the deduction. 

Expansion of 529 Saving Accounts:

529 plans are no longer just for college expenses. Up to $10,000 can be distributed annually to cover the cost of sending a child/dependent to elementary or secondary school.

The following provision is applicable beginning in 2019:

Elimination of Mandate to Buy Health Insurance:

The penalty for not having health insurance has been eliminated. 

As always it is best to consult your tax advisor on any tax reform updates.