Tax Reform: What it Means For Individuals – Itemized Deductions
August 02, 2018

Deduction of State and Local Taxes

Taxpayers may now only claim up to $10,000 ($5,000 for married filing separately) for state and local property taxes, income taxes and general sales taxes paid or accrued during the tax year.

State and local taxes are still fully deductible for businesses and income producing activities (e.g. rental properties).

Home Mortgage Interest Deduction

The deduction for interest on home equity debt is now prohibited unless the funds are used to buy, build or substantially improve a home that secures the loan – referred to as acquisition debt.

The maximum amount that may be treated as acquisition debt has been lowered to $750,000 ($375,000 if married filing separately) for any acquisition debt incurred after December 15, 2017. The maximum acquisition debt limit remains $1 million ($500,000 married filing separately) for any acquisition debt incurred before December 15, 2017. The higher limit will also apply to a refinance if the original debt was incurred before December 15, 2017.

Medical Expense Deduction

The threshold to claim a deduction for unreimbursed medical expenses is reduced to 7.5% of adjusted gross income (AGI) for all taxpayers. Under prior law, the AGI threshold was 10% for those under age 65.

Charitable Contribution Deduction

The limitation on the charitable deduction contribution base is increased to 60 percent of an individual’s AGI for cash donations to public charities. Amounts paid for college athletic seating rights are no longer deductible.

Personal Casualty and Theft Loss Deduction

The deduction for personal casualty losses is now limited to only those losses attributable to federally declared disasters.

Gambling Losses

Under prior law, a professional gambler could fully deduct gambling-related expenses such as traveling to and from a casino. Now these gambling-related expenses fall within the scope of the gambling loss limitation and are allowed only to the extent of gambling winnings.

Miscellaneous Itemized Deductions

Miscellaneous itemized deductions subject to the two-percent-of-AGI limit are completely eliminated. The most popular of these deductions include unreimbursed employee expenses, expenses paid for the production or collection of income (e.g. investment fees) and “hobby” expenses deductible under IRC Section 183.

Itemized Deduction Phaseout

Under prior law, total itemized deductions were reduced if an individual’s AGI exceeded certain thresholds. This “phaseout” limitation has been eliminated.


How will these changes impact you? Give BMM a call for a thorough review of your tax situation. Next week we will take a look at changes to the standard deduction, personal exemptions and child tax credit.