Itemized Tax Deductions After Tax Reform
You can deduct your expenses via your standard deduction or itemized deductions.
Not sure whether to itemize deductions or use the standard deduction? If you prepare and efile your tax return on eFile.com, we will make this easy for you and you can be assured that the results are in your best interest based on the latest tax reform changes. If you have questions, you can always contact one of our Taxperts.
Here is a list of expenses you can itemize starting with your Tax Year 2018 tax return.
1. Medical Expenses
It might be beneficial for you to itemize you, your spouse's and your dependents' medical and dental care expenses on Schedule A associated with Form 1040. When you prepare and efile your taxes via the eFile.com app, we will give you this option and will compare it with your standardized deduction.
How Much Can You Deduct or Itemize?
To find out how much you can deduct, add up your total medical and dental expenses for yourself, your spouse, and dependents for Tax Year 2018. You can only deduct the medical expense amount that exceeds 7.5% of your 2018 adjusted gross income (AGI).
Line 1: Your total 2018 medical/dental expenses (not reimbursed or paid by others) are: $4,200
Line 2: Your AGI in 2018 (see line 7 of the 2018 Form 1040) is: $45,000
Line 3: 7.5% of your AGI - $45,000 is: $3,375
Subtract line 3 from line 1, and this is the amount you can deduct: $825.00.
If line 3 is greater than line 1 you cannot deduct medical/dental expenses. In the example above, you can deduct $825 of your expenses.
2. Taxes You Paid
Deductions for state and local sales tax (SALT), income, and property taxes can be itemized on Schedule A. The total amount you are claiming for state and local sales, income, and property taxes cannot exceed $10,000.
Please keep in mind that state, local, sales, and foreign property taxes deducted on Schedule C, Schedule E or F do not have a limit. For example, if an individual owned and rented a property, their property taxes are not capped.
If you paid $3,210 of Property taxes on your home residence, it would be to your advantage to deduct this amount if it is above your standard deduction.
3. Interest You Paid
What is Home Mortgage Interest?
Home mortgage interest is the interest you paid on debt taken out to buy, build, or improve your home. Just to be clear, you can only deduct the interest you paid on your mortgage debt, not on the debt amount. The interest amount is reported to you on Form 1098 provided for the year by your mortgage company.
A. For home mortgage debt taken out on or after December 15, 2017: Your home mortgage interest deduction is limited to the following debt amounts: $750,000 (Married Filing Jointly) and $375,000 (Married Filing Separately).
B. For home mortgage debt taken out before December 15, 2017: Your home mortgage interest deduction is limited to the following debt amounts: $1,000,000 (Married Filing Jointly) and $500,000 (Married Filing Separately).
As of this writing for Tax Year 2026, the mortgage interest cap goes back to home mortgage interest paid on all mortgages $1,000,000 or lower.
If you sell your home, you can still exclude up to $250,000 from capital gains taxation ($500,000 if Married Filing Jointly) if you owned and used the home as a primary residence for two of the past five years.
Home Mortgage Amount: $235,500
Annual Interest Rate: 4.1%
Annual Mortgage Interest Payment: $9,655.50
You can deduct the $9,655.50 mortgage interest you paid during the tax year.
One Important Change Regarding Home Equity Debt
Interest paid up to $100,000 in home equity debt taken to improve an existing home or to purchase a home is deductible on debts incurred on or before December 15, 2017. You could also use the debt to pay college tuition, credit card debt, or other non-home expenses. In effect, you could deduct interest on a $1.1 million mortgage/debt amount.
For home equity debts incurred after December 15, 2017, you cannot deduct interest on the debt on 2018-2025 Tax Returns unless it is used to buy, build, or improve your home that secures the debt. Your interest deduction is limited to the $750,000 (Married Filing Jointly) and $375,000 (Married Filing Separately) debt amounts. Debts incurred on or before December 15, 2017 are grandfathered into the old amounts listed above. Unless new legislation changes this, it will revert to its prior state for Tax Year 2026 and you will again be able to deduct interest on $1 million mortgage and $100,000 on home equity debt, regardless of when the mortgage was taken out.
4. Charity Contributions
Starting in Tax Year 2018, your cash donation to a public charity cannot exceed 60% of your AGI or adjusted gross income in order to be deductible on your income tax return.
Appreciated assets including long-term appreciated stocks or property is generally deductible at fair market value not to exceed 30% of your adjusted gross income. For record keeping purposes please consider the following:
1. The public charity or private foundation is a non-profit, IRS registered 501(c)(3) organization.
2. Keep a record of the contribution (usually the tax receipt from the charity).
3. For non-cash donations, you might have to obtain a qualified appraisal to substantiate the value of the deduction you are claiming.
Cash Contribution to Private Charity: $1,110. If your AGI is $30,000, 30% of your AGI is $9,000 so you can deduct the $1,110 of the charitable contribution.
5. Casualty and Theft Losses
The itemized deduction for personal casualty and theft losses has been removed for Tax Years 2018 through 2025 with the exception of losses attributable to a federal disaster as declared by the President.
6. Job Expenses and Miscellaneous Deductions
For Tax Years 2018-2025, job expenses and miscellaneous deductions limited to 2% of your Adjusted Gross Income or AGI are eliminated. These include expenses incurred on the job and are not reimbursed (e.g. tools, supplies, uniforms, dues and subscriptions, job search expenses, unreimbursed travel mileage, home office deductions. In summary, deductions for unreimbursed employee expenses and tax preparation expenses cannot be included on 2018-2025 Tax Returns.
7. Total Itemized Deduction Limits
There is no limit on itemized deductions for Tax Years 2018 through 2025.
8. Itemized or Standard Deduction?
Below a summary of the sample amounts listed above in comparison to the new standardized deductions.
1. Medical Expenses: $825
2. Taxes you paid, property taxes: $3,210
3. Mortgage Interest Payment: $9,655.50
4. Charity Contributions: $1,110
Total itemized deductions: $14,850.50
In comparison to standardized deductions:
|Head of Household
|Married Filing Separately
|Married Filing Jointly
As you can see, with the filing status Single and Married Filing Separately you would be well advised to itemize your deductions. All other filing statuses would do better with the standardized deduction.