Less than three weeks away and it is time to pay the Tax Man. Many will find some extra money in their annual tax filing ritual if they are able to discover the last minute tax deductions that are available to them before filing by the April 17th deadline. But there is another reason you should pay close attention to the list that follows: some of these deductions will not be available when you file your return next year. This means you should start planning and see what impact the eliminated deductions will have on what you pay next year.
1. Work expenses that have not been reimbursed by your employer.
This is the first deduction that will disappear next year. Items that you can include for reimbursement are business travel, union fees, uniform cost and maintenance required to perform you job, and college classes and professional seminars that are related to your job. If your employer has reimbursed you for part of these expenses, be sure to have receipts for your out of pocket costs and a summary of what your employer has reimbursed you for.
2. Alimony deductions
This is another deduction that will be eliminated next year. This is the kind of deduction that makes you wonder if Uncle Sam really has thought it through completely. According to the IRS, you will be able to claim the deduction if you will be divorced or separated by the end of the 2018 calendar year. It’s like the IRS advertising a one year benefit plan for people who are having marital problems. Don’t wait until 2019 to get divorced because then there is zero deduction available to you. As for the current law, the tax advantages to claiming this deduction can be significant based on the amount the court has ordered (and you are paying).
3. Losses from casualty or theft
This is a glass-half full deduction for next year. Deductions for losses due to a disaster will be deductible, but only those where the President of the United States has declared an event a disaster. For example, damage caused by hurricanes Harvey, Irma, and Maria which caused so much devastation in Texas, Florida, and Puerto Rico would qualify. This will be the last year to deduct losses associated with theft, fire, or storms that resulted in the loss or damage to your property.
4. Moving expenses directly related to job relocation
Another deduction that will be run over under the wheels of progress and eliminated next year, this deduction can be used if certain conditions are met: you moved at least 50 miles from your previous residence, you need to have conducted the move reasonably close to your starting date at the new location, and you must have clocked in for a minimum of 39 weeks on a full time basis within 12 calendar months. The cost of hiring movers and renting a truck are just two examples of eligible moving expenses.
5. Money you paid to a tax preparer
For most people, this is a small deduction if used at all. But this is another expense the taxpayer will have to pay in full because it will no longer be available after the 2018 tax year. If you use tax software to prepare your returns, that cost is also deductible.
6. Mortgage interest deduction
This is an important one, not only for the current tax year but the changes homeowners will have to plan for after the new tax law takes effect. Any mortgage that originated prior to December 15 of last year is eligible for the mortgage interest deduction for remaining balances of up to $1 million. Any mortgage that originates after that date will have the amount of the deduction limited to homes with balances up to $750,000. Keep this in mind if you are planning on buying a new home in an area that has increasing property values and mortgages.
7. Taking personal exemptions
The calculation of personal exemptions will be completely eliminated after this year. For this tax year you will be allowed to take $4050 for each dependent, including yourself, that you claim on your tax return. The new tax law changes the individual deductions and lumps them into an increase in the standard deduction. Whether you benefit from this rearrangement depends on your personal situation. For example, a single parent with 4 children would get an individual deduction of $20,250 (4050 x 5) in 2018, but only a maximum of $18,000 as a qualifying head of household beginning next year.
All this means that you have things to consider and things to plan – starting today. Most people wait until the end of the year to start calculating their deductions and the amount of their returns, but this year is an exception. Be sure to review these 7 items because not only can they be easily overlooked, but this year will be the last time you can use them. If you need to use a tax preparer, at least this year you can deduct the cost of their help.