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December 14, 2018 | Posted in:

DON’T FORGET: New Rule Changes For These 5 Popular Tax Breaks

New tax legislation provides numerous tax benefits for individuals for 2018 through 2025. But not all the changes are likely to align with your go-to tax strategy from previous years.

 

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    Here are five big tax breaks that could leave you with a tax surprise come April 2019 if you haven’t adjusted your current tax plan:

    1. State and local taxes:

    You may have prepaid taxes at year-end to increase your SALT deduction in previous years. Hold off this year if there’s no tax benefit. The new tax law limits the deduction for state and local taxes (SALT) to $10,000 annually. This includes any combination of property taxes AND income or sales taxes.

    2. Entertainment expenses:

    You can no longer deduct 50 percent of your entertainment expenses. But there’s still some leeway. According to a new IRS ruling, you may deduct 50 percent of food and beverages paid separately from entertainment like a basketball or hockey game. Also, a business can deduct 100 percent of the cost of its holiday party.

    3. Miscellaneous expenses:

    The new law eliminates deductions for miscellaneous expenses, such as out-of-pocket employee business expenses. If possible, have these expenses reimbursed by your employer’s accountable plan. Generally, the expenses are deductible by the employer and tax-free to employees.

    4. Kiddie tax:

    The kiddie tax continues to apply to unearned income above $2,100 received by a dependent child under 19 or full-time student under 24. But the new law puts more teeth into this tax. The kiddie tax is now based on the tax rates for estate and trusts. This generally produces a higher tax, so plan intra-family transfers accordingly.

    5. Home equity loans:

    In the past, a homeowner could deduct mortgage interest paid on the first $100,000 of home equity debt, regardless of use of the proceeds. The new law eliminates this deduction for home equity debt, unless the proceeds from the loan are used to buy, build or substantially improve your home. Fortunately, you may still deduct interest on the first $750,000 of acquisition debt. Take advantage!

    Consult with your Alloy Silverstein CPA to rethink and retool your tax return this tax season.

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