If you are a freelance worker, you may have come to expect certain tax deductions from past tax filing seasons. However, the Tax Cuts and Jobs Act of 2017 has gone away with many of the regular tax deductions that freelance workers have experienced in past years. Due to the many changes, it is best to contact a tax professional to ensure that you are not missing out on other new tax deductions available. In the meantime, here are nine tax deductions that have disappeared as a result of the Tax Cuts and Jobs Act.
1) Unlimited State and Local tax deductions
Under the new law, the maximum amount for state and local deductions is $10,000. Shaun McClung, a Florida based tax manager director, argues that this altered tax deduction is going to hurt middle class taxpayers and taxpayers in states like California and New York, whose state income and property rates are above the average, the most.
2) Personal Exemptions
The new tax reform law actually increases your standard deduction. However, this is replacing the $4,050 in personal exemptions for each dependent. The increased standard deduction attempts to make up for the loss in personal exemptions, but there is a chance the standard deductions won’t make up for the loss entirely.
3) Unrestricted deductions for home equity loan interest
Unlike in the past where the loans could be used for travel or debt consolidation, this deduction is no longer viable unless the loan is being used to “buy, build, or substantially improve” the home that the loan is secured on.
4) A Mortgage Interest Deduction of Debt up to $1 Million
If the mortgage transaction came after January 1, 2018, the deduction for mortgage interest is now capped at $750,000. If the mortgage was taken out prior to January 1, 2018, you are still able to deduct the interest up to $1 million. Again, this change affects those in states such as California and New York.
5) Deductions for Unreimbursed Employee Exemptions
If you are both a freelance worker and employed, you are no longer able to deduct unreimbursed purchases made in relation to your job. In 2017, taxpayers were able to deduct any amount that exceeded 2 percent of their adjusted gross income in 2017.
6) Other Popular Itemized Deductions
In 2017, taxpayers could deduct advisor fees and tax preparation fees. Other disappearing miscellaneous deductions are those costs related to tax preparation services, investment fees, professional dues, qualified employee education expenses, among others on a long list of other previously approved items.
7) A Deduction for Moving Expenses
The deduction for moving expenses has now been erased for practically all jobs, other than military members who are required to move.
8) Unrestricted Deductions for Expenses Related to Natural Disasters
If you were affected by a Natural Disaster in 2018, you are no longer able to deduct any losses that were not covered by insurance. This deduction now only applies to those who live in designated danger zones.
9) Alimony Payment Deductions
For divorces finalized after December 31, 2018, deductions for alimony payments are no longer be available.