1. Mortgage Interest:
The Tax Cuts and Jobs Act (TCJA) limits mortgage interest on loans used to acquire a principal residence and a second home debts up to $750,000 (down from $1 million) starting with loans taken out in 2018. The Act eliminates deduction for interest on home equity loans, regardless of when the debt was incurred.
2. State And Local Taxes:
Taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. Instead, the Act caps at $10,000 state and local income and property taxes or state and local property and sales taxes. That means homeowners living in high-tax states like California, New York, and New Jersey could see an increase in their federal taxes.
3. Medical Expenses:
Old law imposed a restrictive floor of 10% of AGI (adjusted gross income) meaning that you can only deduct excess over 10%.The new law puts back a prior law that uses a less restrictive floor of 7.50% of AGI.
4. Casualty And Theft Losses:
The itemized deduction for casualty and theft losses has been suspended (except for losses incurred in a federally declared disaster areas).
5. Miscellaneous Itemized Deductions:
Miscellaneous itemized deductions for tax preparation costs, investment expenses, union dues, and unreimbursed employee expenses which were formerly deductible if they exceeded 2% of adjusted gross income have been eliminated. Sorry.
6. Overall Limitation On Itemized Deductions:
The Tax Cuts and Jobs Act (TCJA) suspends the overall limitation on itemized deductions that formerly applied to taxpayers whose adjusted gross income exceeded specified thresholds. The itemized deductions of such taxpayers were reduced by 3% of the amount by which AGI exceeded the applicable threshold, but the reduction could not exceed 80% of the total itemized deductions, and certain items were exempt from the limitation.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].