People who claim the standard deduction typically do not have to concern themselves with the newest tax codes. However, when you plan on itemizing your deductions this tax season, you should review the latest tax code changes so you know how they will affect your return. Before you file your taxes, you will need to know how the changes made with the Tax Cuts and Job Act will impact the deductions you plan to make on your upcoming taxes. 

What is the Tax Cuts and Job Act? 

The Tax Cuts and Job Act or TCJA is a piece of tax code legislation signed into law on December 22, 2017. It was actually altered and rewritten several times before it went into effect in January 2018. It has made dozens of changes to existing tax codes and in particular affects people who itemize rather than take standard deductions on their tax returns. 

Most of the tax codes changes made with the TCJA are temporary and are set to expire in 2025. However, Congress will also have the option of renewing some or all of the TCJA changes at the time of or before they expire. Until then, taxpayers who plan to itemize their deductions are encouraged to review the TCJA carefully before filing their taxes and claiming all or some of the deductions listed in it. 

Standard Deduction 

As a rule of thumb, most people who take the standard deduction on their tax returns have little reason to research tax codes that affect itemized deductions. However, the TCJA not only changed many itemized deductions taxpayers use when filing taxes, it also has doubled the amount of the standard deduction. 

In fact, the standard deduction amount in the TCJA rose from $12,000 to $24,000 for taxpayers filing married filing jointly. It likewise increased the standard deduction amount for the elderly, blind, and disabled individuals who have no surviving spouse from $1550 to $1600. Elderly taxpayers over the age of 65 who file married filing jointly get an increased standardized deduction from $2500 to $2600. 

It should be noted, however, that the TCJA eliminated the personal exemption deduction of $4050. Taxpayers will not be able to claim the personal exemption at all when filing their 2018 taxes. 

Medical Expenses Deduction 

Before the TCJA was enacted, taxpayers could claim medical expenses that accounted for more than 10 percent of their adjusted gross income or AGI. With the TCJA in effect, this amount has been lowered to 7.5 percent for the 2017 and 2018 tax years. 

Further, you can only claim the medical expenses deduction for costs that you paid for yourself, your spouse, or your qualifying dependents. These costs must have been paid during the same tax year for which you plan to claim them as a deduction. 

You should note that you cannot claim this deduction for cosmetic surgeries and treatments unless they are deemed to be preventative. Likewise, if these surgeries or treatments are deemed necessary to address an existing health condition, you can also claim the expense of them as a medical expense deduction as long as it exceeds 7.5 percent of your AGI. 

Casualty and Theft Losses Deduction 

The TCJA changed a portion of the Casualty and Theft Losses deduction. In particular, it eliminated taxpayers’ ability to claim the loss of material goods to theft on their tax returns. If something of value like a laptop computer is stolen from your home, you can no longer claim its value as a deduction on your return. 

However, if you suffered a property loss because of a federally declared disaster, you can claim this deduction and recoup some or all of the loss’s value. The event must be a federally declared event by the president. These events can include: 

• Hurricanes
• Tornadoes
• Droughts 
• Earthquakes
• Volcanic eruptions

As long as the loss occurred during a cited federally declared disaster, you can claim it as part of this deduction on your tax return. 

Relocation Expense Deduction 

Prior to the TCJA, workers could deduct work-related moving expenses on their returns. The TCJA eliminates this deduction for most American workers, however. It does not apply to American active duty military personnel who are ordered to move because of service-related obligations. 

The elimination of this deduction is set to expire in 2025. Workers who can wait until then to move for work purposes may be encouraged to do so if they hope to use this deduction on their tax returns. 

Pease Limitations Deduction 

The Pease limitations prior to the TCJA limited the amount of money that wealthy people could make to charitable contributions and then claim as deductions on their tax returns. It used to be that the amount of charitable contributions itemized deductions were limited to three percent of every dollar of taxable income over the stipulated income thresholds and up to 80 percent of itemized deductions. 

The TCJA has eliminated the Pease limitations, however, and now allows people to donate as much as they want to charities regardless of their income. They can then use that amount as a deduction on their tax return. 

Home Mortgage Interest Deduction 

The Pease limitation also impacted the amount of money that people could claim using the home mortgage interest deduction. The TCJA did not eliminate this deduction. However, it does limit the deduction for people who can afford significantly higher mortgages. 

Prior to the TCJA, homeowners could deduct interest on mortgage loans valued $1 million or more if the homes were used as second residences. This amount was reduced to $500,000 for taxpayers filing married filing separately. They could also deduct interest on home equity loans valued up to $100,000. 

With the TCJA in effect, the mortgage amount to qualify for this deduction has been lowered to $750,000 for married filing jointly and $375,000 for married filing separately. Taxpayers also can no longer deduct interest that they pay on home equity loans. The change to this tax code affects mortgages that were contracted prior to December 14, 2017 and are valued at $750,000 or more. 

The TCJA has made numerous changes to existing tax codes that impact people who plan to itemize deductions on their returns. Before you file, you may want to research these tax code changes and determine how they will impact your own tax return. They could compel you to change the manner in which you file and the deductions you will take for the 2018 tax year.