One of the biggest changes brought about by the Tax Cuts and Jobs Act (TCJA) is the elimination of many personal itemized deductions. Beginning in 2018 and running through 2025, taxpayers will not be able to deduct expenses such as union dues, investment dues, or hobby expenses. however, gambling losses are still deductible.
personal expenses that are no longer deductible
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Specifically, the TCJA suspended from 2018 to 2025 a large group of deductions grouped into a category called “miscellaneous itemized deductions” that were deductible to the extent they exceeded 2% of a taxpayer’s adjusted gross income. These include the following deductions:
Unreimbursed labor expenses. These are work-related expenses that an employee pays for out of pocket. include:
- job-related travel, transportation, and meal expenses
- union dues
- business liability insurance premiums
- depreciation of a computer or cell phone your employer requires you to use at work
- debts to professional corporations
- education (job-related)
- home office expenses for part of your home that is used regularly and exclusively in your work
- expenses of looking for a new job in your current occupation
- legal fees related to your work
- subscriptions to trade and professional magazines related to your job
- tools and supplies used in your job, and
- work clothes and uniforms (if necessary and not suitable for everyday use ).
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None of these expenses are deductible during 2018 to 2025. Therefore, you should seek reimbursement from your employer for them. This refund is tax-free as long as you properly document your expenses. Alternatively, you could seek a pay raise to help pay for these expenses, but the raise would be taxable.
investment expenses. Expenses you pay for personal investments are also not deductible as a personal itemized deduction during 2018 through 2025. This includes:
- investment advisory and management fees
- fees for legal and tax advice related to your investments
- trustee fees to manage IRAs and other investment accounts, and
- safety box rental fees.
tax preparation fees. Tax preparation fees are also not deductible for 2018 through 2025. This includes the costs of hiring a tax professional or purchasing tax preparation software or tax publications. it also includes any fees you pay to file your return electronically. If you have a tax professional prepare your personal and business taxes, request a separate invoice for your business return. Reason: Fees to prepare your business return remain a fully deductible business expense, not a personal itemized deduction.
fees to fight the irs. Between 2018 and 2025, you cannot deduct as an itemized deduction attorneys’ fees, accounting fees, and other fees you incur in determining, contesting, paying, or claiming a refund of any tax.
hobby expenses. A hobby is an activity that you engage in primarily for a reason other than profit, such as for fun. Prior to 2018, fans were allowed to deduct their fan-related expenses up to the amount of fan income they earned each year (but only expenses greater than 2% AGI were deductible). The TCJA eliminates the itemized deduction for hobby expenses from 2018 to 2025. This means you won’t be able to deduct any expenses you earn from hobbies during these years. however, you still have to report and pay taxes on any income you earn from a hobby. however, if your hobby involves selling products to customers, you can deduct the costs of products sold when calculating income from your hobby. For example, if your hobby is making and selling pottery, you can deduct the cost of making each pot you sell from your hobby income.
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personal expenses that are still deductible
Some miscellaneous itemized expenses remain deductible through 2018 through 2025 for itemizing taxpayers.
cash & non-monetary contributions. the deduction for cash & non-monetary contributions have not been affected by the tcja. the deduction for charitable donations remains for itemizing taxpayers. Under the new law, this exemption is limited to 60 percent of adjusted gross income for cash gifts, but any amount in excess of that can carry over for up to five years. For contributions of cash, check, or other monetary gift (regardless of the amount), you must keep a record of the contribution b> b>: …in addition to deducting your cash contributions, you can generally deduct the fair market value of any other property you donate to qualified organizations.
losses in games of chance. the deduction for gambling losses has not been affected by the tcja. these remain deductible up to the amount of your gambling winnings for the year. you cannot simply reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. these losses are not subject to the 2% limit on miscellaneous itemized deductions.
investment interest. If you borrow money to buy an investment, the interest you pay on the loan is called investment interest. investment interest remains deductible for itemizing taxpayers. however, the deduction is limited to the amount of taxable investment income you earn each year, such as dividends, royalties, or interest. any disallowed investment interest is carried forward for deduction in future years. Investment income generally does not include qualified capital gains or dividends that enjoy favorable tax treatment. however, you may choose to include long-term capital gains and qualified dividends in your investment income. this may allow you to deduct a larger amount of investment interest. however, when you do this, your long-term capital gain and qualifying dividends should be taxed at your ordinary income tax rates, not the generally lower capital gains rates.
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