The limitations on itemized deductions have gotten a lot of attention under the new Tax Cuts and Jobs Act (TCJA). More individuals will take advantage of the standard deduction instead of itemizing due to the deduction almost doubling.
While the TCJA law made changes to itemized deductions, it left most of the above the line deductions untouched. These deductions are adjustments to income and help get your total gross income to a smaller adjusted gross income, known as AGI.
Some of the above the line deductions impacted by TCJA are as follows:
Educator Expenses – Eligible taxpayers can deduct up to $250 of qualified unreimbursed classroom expenses paid out of pocket. If filing a joint return, and both taxpayers are eligible educators, the maximum deduction is $500. Under the TCJA, the excess deduction on Schedule A has been eliminated.
Alimony – The deduction for Alimony paid to ex-spouse is an adjustment to income for 2018. Under TCJA, this above the line deduction disappears for those individuals divorced in 2019 thru 2025.
Other above the line deductions remained unchanged as follows:
Health Savings Accounts – Taxpayers can write off contributions to Health Savings Accounts (HSA). The annual contribution limit for individuals with family high deductible health plan is $6,900 and $3,450 for self-only coverage. The taxpayer must file form 8889.
Retirement Contributions – Enjoy being your own boss? Maximize your retirement contributions thru various options (SEP IRA, Simple IRA, Traditional IRA, or Keogh). These deductions are based on earned/net income from the taxpayer.
Self Employed Health Insurance – Another benefit of being your own boss or independent worker, if you paid health insurance premiums on a medical policy, they are fully deductible.
Self-Employment Tax – If you were your own boss or maybe worked a side job for some extra cash, you likely will be subject to self-employment tax. Half of the self-employment tax remains an above the line deduction.
Student Loan Interest – Depending on your income levels, you may be able to deduct up to $2,500 in interest on student loan debt. There were discussions this deduction would be eliminated, but it survived and remains a deduction in 2018 through 2025.
With so many deductions eliminated or limited, these were a few other deductions to help some taxpayers lower their adjusted gross income. If you have questions about how these deductions affect your tax situation or would like to discuss further, please contact us.