Tax day is closely approaching. Many changes need to be taken into consideration. You may not want to file your taxes the same way you did last year.
Mortgage interest, charitable contributions, and medical expenses
These three deductions remain, but there have been slight tweaks made to each.
First, the mortgage interest deduction can only be taken on mortgage debt of up to $750,000, down from $1 million currently. This only applies to mortgages taken after Dec. 15, 2017; pre-existing mortgages are grandfathered in. And the interest on home equity debt can no longer be deducted at all, whereas up to $100,000 in home equity debt could be considered.
Next, the charitable contribution deduction is almost the same, but with two notable changes. First, taxpayers can deduct donations of as much as 60% of their income, up from a 50% cap. And donations made to a college in exchange for the right to purchase athletic tickets will no longer be deductible.
Finally, the threshold for the medical expenses deduction has been reduced from 10% of adjusted gross income (AGI) to 7.5% of AGI. In other words, if your adjusted gross income is $50,000, you can now deduct any unreimbursed medical expenses over $3,750, not $5,000 as set by prior tax law. Unlike most other provisions in the bill, this is retroactive to the 2017 tax year.
The SALT deduction: Bad news for high-tax states
The biggest tax deduction by dollar amount that Americans have taken advantage of in recent years is the deduction for state and local taxes -- also known as the SALT (State and Local Taxes) deduction. Specifically, Americans have been able to deduct the following:
State and/or local property taxes, such as those paid on a personal residence, automobile, or other personal property.
State and local income taxes or state sales taxes, whichever results in the larger deduction. Generally speaking, income taxes are the better deduction, but the option to deduct sales tax allows residents of states without an income tax to benefit, as well. If you choose the sales tax option, you don't need receipts -- the IRS provides a calculator to determine this deduction.
Starting with the 2018 tax year, however, the SALT deduction is limited to a total of $10,000. This may sound like a lot, but many Americans -- especially those in high tax states like New York, New Jersey, and California -- have been deducting several times this amount. For example, the property tax on my parents' modest home in New Jersey almost reaches the $10,000 cap all by itself.
Now, millions of Americans cannot deduct their state and local taxes, and on top of that, the higher standard deduction means that many families who pay high amounts of state and local taxes may not be able to take advantage of the SALT deduction at all.
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This month we will be supporting Kyle's Kamp. A local charity started by Kyle's parents while he was hospitalized, undergoing treatment for cancer, as a Facebook page to update family and friends on is progress. It quickly evolved into a local charity raising millions of dollars benefitting Childrens National for research for childhood cancer. We will be participating in their Casino Night at Westwood Country Club February 24th. If you want to learn more about this worthy charity please visit www.kyleskamp.org.