FIVE TAX DEDUCTIONS FOR SAVINGS
January 12, 2019 - Douglas Myser
Five tax deductions for savings. The Tax Cuts and Jobs Act made the most sweeping changes to the U.S. tax code in several decades, and the first time most Americans will really feel its impact is when they file their 2018 tax return sometime in 2019. With that in mind, here are five deductions or types of deductions that can still save you lots of money under the new tax law and what you need to know about each. The Standard deduction. The vast majority of Americans will take advantage of the standard deduction in 2019, but this has become a far larger deduction than it used to be. The Tax Cuts and Jobs Act has made the standard deduction much larger than it used to be. Roughly 70% of taxpayers have used the standard deduction, and experts now expect that 95% of all taxpayers will find the standard deduction more valuable than itemizing.
Five tax deductions for savings. Itemized deductions. Thanks to the Tax Cuts and Jobs Act and the higher standard deduction that came with it, experts have estimated that only about 5% of Americans will be able to itemize deductions going forward. Several deductions can be itemized, but the "big four" generally determine whether you can itemize. Mortgage interest--You can deduct the interest on qualified residence loans of as much as $750,000 in principal balances. Home equity loan interest can be included, but only if the loan's proceeds were used to substantially improve your primary or secondary residence.
Charitable contributions. The deduction for charitable contributions survived the Tax Cuts and Jobs Act mostly intact. Medical expenses--Medical expenses in excess of 7.5% of your adjusted gross income are deductible for the 2018 tax year. This threshold is set to rise for 10% for 2019, but it's certainly possible Congress will decide to extend it. State and Local taxes--Also known as the SALT deduction, this includes state and local income taxes or sales taxes, as well as property taxes, but the deduction is capped at $10,000 Those who end up with a tax increase can contact a Tax Resolution Company and ask them for help with the IRS Fresh Start Program so they don't end up with a IRS Wage Garnishment.