Live it up on the tax deductions you claim when you file your federal income taxes this year, because you may not be able to claim many of them for 2018.
The tax reform bill signed into law by President Donald Trump in December eliminates some deductions, replacing them with higher standard deductions. The 2017 standard deduction for single filers is $6,350, but it’ll be increased to $12,000 in 2018. The standard deduction for married couples filing jointly will rise from $12,700 to $24,000.
The expectation is that next year this will encourage more taxpayers to take their new standard deductions and simplify the tax-filing procedure ― the infamous “file your taxes on a postcard” idea. Even the deductions that survived Trump’s bill will be claimed less often since people will have to reach a higher threshold to itemize at all.
Here are a few things you may not realize you still can deduct for 2017:
Most overlooked tax deductions this year
Most overlooked tax deductions this year
Did you make a big purchase in 2017, like a car or new home appliances? If you file a Form 1040, and itemize deductions on Schedule A, you have the option of claiming either state and local income taxes, or state and local sales taxes (you can’t claim both). If you saved your receipts throughout the year, you can add up the total amount of sales tax you paid and claim that amount. The IRS provides a calculator to help you determine which is more advantageous for you.
Things that uniquely benefit your business.
There are a multitude of things that can be deducted if you are able to show how they benefited your business. A freelance journalist can claim a deduction for a cable news subscription. A bodybuilder can deduct the body oil he used in competition. TurboTax noted in a blog post that a junkyard owner could deduct the cost of cat food that encourages stray cats to hang around and keep the mice and rats away. A stripper was allowed to deduct the cost of her breast enlargement surgery.
Gone in 2018 will be any deductions for unreimbursed employee expenses.
Health insurance premiums.
Deductible medical expenses have to exceed 7.5 percent of your adjusted gross income to be claimed as an itemized deduction for tax years 2017 and 2018. However, if you’re self-employed and responsible for your own health insurance coverage, you might be able to deduct 100 percent of your premium cost. (This is technically not an itemized deduction, since it gets taken off your adjusted gross income, but we didn’t want our friends who work in the gig economy to miss out on this one.)
You probably know that the money you give to a recognized charity can be deducted. Same is true of your donations of goods to charity thrift stores. But don’t forget about the cookies you baked for the school fundraiser (the cost of the ingredients qualify as deductions) and the old towels you dropped off at the animal shelter. You can also deduct the cost of the babysitter you hired when you volunteered to walk the dogs there.
Finding and getting a job.
Expenses related to finding a job are sometimes deductible. If you’re seeking work in the same field and your job-hunting expenses exceed 2 percent of your adjusted gross income, you can deduct them. Travel to interviews, mileage, the cost of printing your resume and commission paid to a recruiter are all eligible expenses. And should you land a job, you can still deduct the costs of relocating ― not just yourself, but your family, pets included. Note to recent college graduates: This deduction does not apply to first jobs. But once you get a job, you can deduct your union dues (assuming you paid them in 2017).
The two rules here are: The clothes must be a requirement of the job ― uniforms for police and firefighters, health care workers, letter carriers, waiters, for example ― and the outfit cannot be something suitable for personal wear ― a clown costume, perhaps? Those who perform in the entertainment field can deduct what they wear. Dry cleaning costs for this are also deductible.
To claim the American Opportunity Credit, you must have paid educational expenses either for yourself, your spouse, or for one of your dependents at an eligible post-secondary institution. Expenses include tuition, fees, textbooks, and class supplies.
This is a direct dollar-for-dollar credit for the first $2,000 of eligible expenses. After that, you can recoup 25 percent of the next $2,000 in eligible expenses up to a maximum of $2,500. The credit first offsets your tax liability, after which up to $1,000 of this credit may be refunded to you. To be eligible, your adjusted gross income must be less than $90,000 if filing single, or $180,000 or less if married filing jointly. The amount of the credit you can claim phases out if your adjusted gross income exceeds $80,000, or $160,000 for joint filers.
Selling your kid's old bicycle is not likely to cause any tax consequences, but when you sell crafts, vintage or specialty items on websites like Etsy, you must report and pay taxes on your net income. You will also likely need to pay self-employment tax on your profits, and in some locations, you may also be responsible for charging and collecting sales tax.
If you use vehicles in your small business, how and when you deduct for the business use of those vehicles can have significant tax implications. It pays to learn the nuances of mileage deductions, buying versus leasing and depreciation of vehicles. Special rules for business vehicles can deliver healthy tax savings.
Congress has passed the largest piece of tax reform legislation in more than three decades. The bill will affect the taxes of most taxpayers, but one key point to keep in mind is that for most people, the bill won't affect your taxes for 2017 (the one you file in 2018).
Every April, many taxpayers wait until the last minute to file their federal income tax returns. Despite this tendency, there are many reasons to file your taxes early. If you will receive a refund, you may want to submit your return as quickly as possible. Additionally, there are benefits to filing early for those taxpayers who have a balance due.