Kelly J. Bullis: Do you itemize your deductions?
May 19, 2018
How many times have you heard somebody tell you, "You need some tax deductions?"
You know … mortgage, charity, extra sales tax on large purchases, auto registrations, property taxes, medical expenses, stockbroker fees, investment interest expense, employee business expenses, etc.
Well, the new Trump tax law (officially known as the "Tax Cuts and Jobs Act" or TCJA for short), made some major changes. For many folks, it will be much simpler!
First of all, no more miscellaneous itemized deductions (employee business expenses, tax preparation fees, stockbroker fees, safe deposit box, etc.) All gone! More on one of your options later.
Second, a lot of mortgage interest expense is gone. Original purchase and substantial improvement related loans completed after Dec. 15, 2017 are limited to a total maximum loan of $750,000. No more home equity interest. Warning: If, in the past, you refinanced your mortgage and pulled in more than $100,000 of non-acquisition/improvement related debt, that portion of your mortgage interest isn't deductible any longer, even if it's in a first mortgage.
Medical expense limitation dropped back down to 7.5 percent of your adjusted gross income, but that's still always been a tough nut to crack. You either must have low income, or a lot of medical expenses in order to get to deduct any medical related itemized deductions.
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The standard deduction just skyrocketed — $12,000 for singles and $24,000 for joint filers. There are still additional standard deductions of $1,550/$1,250 for those over 65, or blind.
Regarding still deducting charity (when no longer itemizing), in a prior column, I already laid out how to deduct charity if you have an IRA and are at least 70.5 years old but don't itemize any longer.
If you're paying stockbroker "managed account" fees, you may need to talk to your stockbroker and change to a "per transaction" fee arrangement. (While you're at it, tell them to stop churning your account and start buying and holding stocks, which will also keep your fees down).
For those of you who might still need to itemize, you'll continue to need to keep track of certain expenses, such as large purchases sales tax (cars, furniture, etc.), large medical expenses, auto registrations, charity. Most of the rest should usually come to you in the form of statements from payers (mortgage interest, property taxes, etc.)
For most folks, the standard is now all you will be taking, no more need to keep track of all those "deductions" and have proper documentation, etc. Just take the standard deduction and you get to have your "tax deductions" cake and eat it, too!
Did you hear? Proverbs 24:27 says, "Prepare your work outside; get everything ready for yourself in the field, and after that build your house."
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. He's on the web at BullisAndCo.com Also on Facebook.