3 Lost Tax Deductions That Might Surprise You
As you’re doing your 2018 taxes, you'll see that deductions certainly aren't what they used to be.
The Tax Cuts and Jobs Act was the single largest tax reform legislation passed in the last 30 years. It changes tax laws that impact retirement planning, mortgages, corporation, partnerships, small-business owners and even state taxes to some degree.
3. Charitable Contributions
While charitable contributions were not removed by the TCJA, far fewer Americans will be able to take advantage of them in 2018. In order to deduct charitable contributions, you need to itemize. The number of tax filers who will itemize for 2018 is expected to drop dramatically.
But this isn’t all bad news. One reason itemizing at the federal level is dropping in 2018 is due to both reduced deductions and standard deduction almost doubling. In 2018, the standard deduction for a single filer is $12,000 and for married filing jointly is $24,000 — nearly double the standard deduction in 2017.
As such, far fewer individuals will have itemized expenses taking them above the standard deduction, meaning many people will not be able to deduct their charitable contributions. Keep in mind that there are some strategies to maximize your tax deductions for your charitable contributions, including bunching contributions and donor advised funds.
Whether you end up paying more or less in taxes in 2018 really depends on your situation. If you relied heavily on these popular itemized tax deductions in the past, your taxes could go up. Overall, most people will end up seeing a slight decrease in taxes thanks to the increased standard deduction — even though we said goodbye to some big deductions.
*Note that there’s an exception/grandfather clause for mortgages where there’s a binding contract before Dec. 15, 2017, to close before Jan. 1, 2018, and the purchase is complete by April 1, 2018.
About the Author
Director of Retirement Research, Carson Wealth
Jamie Hopkins is a well-recognized writer, speaker and thought leader in the area of retirement income planning. He serves as Director of Retirement Research at Carson Group and is a finance professor of practice at Creighton University's Heider College of Business. His most recent book, "Rewirement: Rewiring The Way You Think About Retirement," details the behavioral finance issues that hold people back from a more financially secure retirement.