This article was last edited on April 27, 2019.
The Tax Cuts and Jobs Act of 2017 made several significant alterations to the IRS tax code that could affect you and your clients. While this is nowhere near a comprehensive list of changes, here are some notable modifications you need to be aware of that will have lasting effects.
Certain tax deductions are no longer available
One of the main objectives of the act was to simplify the tax code, which means some deductions that existed prior to the TCJA were eliminated, to include:
- Moving expenses: This deduction allowed you or your clients to offset the costs of a job-related move. Now, it’s only available for specific military personnel.
- Causality and theft losses: With this option, you were able to deduct the value of stolen items from a home burglary. This deduction now only allows you to write off losses associated with federally declared disasters.
- Alimony deduction: Alimony once was considered income, but it no longer is. Couples used to make agreements where the party making the payments could deduct those funds from their federal taxes.
- School donations: If your clients used to purchase season tickets for football, basketball or any sport at their college alma mater, they were once able to deduct that donation to the college or university. That’s no longer the case.
Pass-Through income deduction
If any of your clients are small business owners, look into whether they qualify for the pass-through income deduction. With this tax break, a 20% deduction is given to small business owners and self-employed individuals with pass-through businesses such as sole proprietorships, partnerships, S corporations or limited liability companies (LLCs). There are some caveats to this deduction, so be sure to check out the IRS website to find more details.
Changes to the Alternative Minimum Tax (AMT)
The Alternative Minimum Tax was enacted to ensure high-income taxpayers contribute their fair share. Before the TCJA, it had one major flaw: inflation. AMT was never updated for inflation, which meant more middle-class taxpayers were being subjected to AMT. From the 2018 tax year and onward, AMT exemptions will be automatically updated for inflation. Also, the AMT exemption amounts themselves have significantly increased. These changes ultimately mean few taxpayers must pay the AMT.