ADJUSTMENTS to income (referred to as “above the line deductions”) are deductions to arrive at Adjusted Gross Income (AGI). These expenses reduce your income directly without going through itemized deductions. The amount after deducting these expenses is your Adjusted Gross Income. These amounts go straight to your Form 1040 as opposed to itemized deductions on Schedule A. That means that you benefit from such adjustments to income whether you itemize deductions or take the standard deduction.
1. Moving Expenses
The Tax Cuts and Jobs Act (TCJA) suspended the deduction for job-related moving expenses. The exclusion for moving expense reimbursements has also been suspended. This suspension does not apply to members of the U.S. Armed Forces on active duty who move pursuant to a military order related to a permanent change of station. However, employers may exclude from wages any 2018 reimbursements to or payments on behalf of employees for moving expenses incurred for a move that took place through December 31, 2017, and which would have been deductible had they been paid prior to that date.
2. Alimony
Alimony will no longer be deductible by the paying spouse and will no longer be taxable to the receiving spouse. This applies 2019 divorce decrees and separation agreements (existing decrees and agreements will continue to be taxed under the old rules).
3. Health Care “Individual Mandate”
Consumers who did not qualify for an exemption and chose not to purchase insurance faced a range of tax penalties. This individual mandate is out. Starting in 2019 (for the 2020 filing season), there is no longer a penalty for individuals who fail to obtain minimum essential health coverage. Nice! So for next year, consumers who do not purchase health insurance will no longer face penalties. This measure could decrease spending on the tax subsidies it offers to balance out the cost of premiums for millions of Obamacare enrollees. However, fewer healthy and young people could sign up for health coverage through the insurance marketplace, which will likely lead to increases in premium costs for those who remain the marketplace. Some insurers may even drop out of the market. We’ll see.
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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].