The GOP tax plan's unwelcome surprises - the disappearing deductions
After Americans and their accountants unwrap the Republicans' and President Trump's "giant tax cut for Christmas," if they itemize their deductions, they can expect to find some unwelcome provisions hiding among the cuts to corporate and individual tax rates.
On top of the limits to state and local tax, as well as property, deductions (up to $10,000) and the cap on new mortgages ($750,000), there are more than a few deductions that haven't attracted quite as much attention and are going away once the tax bill passes.
Here are a few of the ones that may hit you:
Does your company subsidize your parking/transit?
That's going away. Some companies subsidize their employees' transit because they receive a tax break for doing so. The current law allows companies to subsidize up to $255 per month in employee commuting expenses -- including including public transportation, biking and parking.
But the GOP tax plan is doing away with that incentive. Companies that want to continue to give employees the subsidy can of course continue to give it, but they'll have to do so without the tax benefit. The argument for getting rid of the incentive is that since corporations are getting a hefty tax cut, they no longer need the smaller breaks that just muck up the tax code.
On the upside, you'll still be able to use your pre-tax income to pay for your parking or public transportation. According to WageWorks, which provides employee benefit services, employees save an average of 30 percent on their commuting costs by using these accounts, while companies save up to 7.65 percent on their payroll taxes.
Bicycle commuters are out of luck
While transit-takers and and drivers will still be able to use pre-tax income for public transportation and parking costs going forward, the $20 per month reimbursement bicycle commuters could collect from their employers will be discontinued.
What about alimony payments?
Right now, if you're divorced and paying alimony, you're able to deduct those payments to your ex-spouse, and your ex has been paying income taxes on those payments. If you're already divorced, that will remain the case. But the tax bill will affect couples who divorce or separate after Dec. 31, 2018 -- after that alimony payments will not be deductible. Recipients also won't be taxed on the payments.
Are you moving across the country for a new job?
How fast can you move? Can you book those expenses before New Year's Day 2018? Current law says you can deduct reasonable moving expenses if you're moving because your job has moved or you've started a new job or business.
Under the new tax plan, deducting moving expenses won't be allowed -- the suspension of the moving expense deduction will go into effect after the new year. It does expire at the end 2025, though.
Did you lose your house to a fire?
For now, until the end of 2017, if you suffered property loss or damage from an event like a fire, storm or shipwreck that wasn't covered by insurance, you can take a deduction for your losses.
If disaster strikes in 2018, you'll only be able to claim a deduction for a personal loss of property if it occurred in an event that's been declared a disaster by the president -- Mr. Trump has declared Puerto Rico, parts of Texas and Florida disasters for hurricanes, for instance. Like that moving deduction suspension, this one also expires in 2025.
Are you buying a house?
The mortgage interest deduction on loans is dropping from $1 million to $750,000 in 2018. If you take a loan for more than $750,000, you'll still get a deduction -- you'll just be able to claim it on the first $750,000 of the loan, though.
Are you improving that house?
Great! You get to keep deducting interest on home equity loans up to $100,000 -- as long as you're using the money for home improvements. But home equity loans and their low interest rates are often also used for purposes that have nothing to do with adding a new kitchen or bathroom -- like consolidating debt, or financing a big purchase, or paying for your child's education. If that's what you're using a home equity loan for, you're not going to be able to deduct the interest.
What about state and local taxes?
High-tax state dwellers be warned. You'll only be allowed to deduct up to $10,000 total in state and local taxes, property taxes and income taxes. (Yes, that's $10,000 total -- not each) So, prepay those 2018 property taxes if you're allowed to.
Do you pay someone to prepare your taxes?
Say goodbye to deducting what you pay your accountant for preparing your taxes under the new tax plan. Or if you use computer software to file your taxes, you won't be able to deduct the cost for that either. And the same applies to electronic filing fees.
And if you work in entertainment...
...You'll likely see some important tax deductions disappear. No more deductions for the commissions you pay your agent and manager, or even your union dues. Variety quoted an Actors Equity Association letter to its members saying, that other unreimbursed business expenses would also no longer be deductible -- like "audition travel or acting lessons," as well.
