Nine Deductions You Could Lose if the GOP Tax Bill Becomes Law

The Republican tax bill eliminates many popular and valuable individual tax deductions that have been around for decades.

The new Republican tax bill (officially called “The Tax Cuts and Jobs Act," H.R. 1) is 429 pages long and contains provisions that both give to and take away from taxpayers. It doubles the standard deduction for individual taxpayers and adopts a new set of tax brackets that lowers income taxes for many. However, the bill also eliminates many popular and valuable individual tax deductions that have been around for decades. These include the following deductions. Note, however, that none of these proposed changes have been enacted into law; they are merely proposals that may undergo further alteration, or they might not be enacted at all.

For updated information on the changes enacted by the Tax Cuts and Jobs Act, see How the Tax Cuts and Jobs Act Affects Individual Taxpayers.

Medical and Dental Expenses

Under existing tax law, taxpayers who itemize their personal deductions may deduct their medical and dental expenses if, and to the extent, they exceed 10% of their adjusted gross income (AGI). In 2015, over 8.7 million taxpayers claimed this deduction, which enabled them to write off almost $87 billion in such expenses. This deduction is often used by the elderly and others who need to pay for expensive long-term care. The Republican tax bill eliminates this deduction starting in 2018.

Unreimbursed Employee Expenses

Employees who incur out-of-pocket expenses to perform their jobs may claim a deduction to the extent such expenses are not reimbursed by the employer. This is a miscellaneous itemized deduction, meaning it may be claimed only by taxpayers who itemize. Also, such expenses are deductible only if, and to the extent, they exceed 2% of the employee’s AGI. Common employee expenses include job-related mileage (not including personal commuting), long-distance travel expenses, continuing education expenses required for the present job, job search expenses for the same occupation, work-related dues and subscriptions, depreciation on a home computer used for work, and home offices used for the convenience of the employer. In 2015, 14.6 million taxpayers claimed this deduction for a total of more than $96 billion. The Republican tax bill eliminates this deduction starting in 2018.

If this deduction is eliminated, employees should seek reimbursement for such expenses from their employers. This would be tax-free for the employee and tax deductible by the employer.

Student Loan Interest

Individuals who borrow money to go to college may deduct up to $2,500 in student loan interest each year. This is an “above-the-line deduction” that you may claim without itemizing your personal deductions, something only 30% of all taxpayers do. This deduction is phased out for individual taxpayers with incomes over $65,000 and $130,000 for marrieds filing jointly. In 2015, about 12.1 million taxpayers claimed this deduction, for a total of more than $13.4 billion. The average deduction was about $1,100, saving the average taxpayer about $202 in tax. The Republican tax bill eliminates this deduction starting in 2018.

Alimony

Alimony may be deducted by the ex-spouse who pays it. This is also an above-the-line deduction that may be claimed without itemizing. In 2015, about 598,888 taxpayers claimed the alimony deduction, for a total of more than $12.3 billion. The Republican tax bill eliminates this deduction starting in 2018. However, ex-spouses who receive alimony will no longer be required to pay income tax on the payments.

Tax Preparation Fees

Taxpayers who itemized their deductions may deduct tax their preparation fees—a relatively small dedudtion for must taxpayers. Nevertheless, in 2015 about 20.6 million taxpayers claimed this deduction, for a total of more than $7.9 billion. The Republican tax bill eliminates this deduction starting in 2018.

Moving Expenses

Taxpayers may deduct the cost of moving due to a job change, or change of business location. To deduct moving expenses, the new workplace must be at least 50 miles farther from the taxpayer’s old home than the old job location was from the old home. This is an above-the-line deduction that may be taken without itemizing. In 2015, an estimated 1.1 million taxpayers claimed the moving expenses deduction, for nearly $3.7 billion. The Republican tax bill eliminates this deduction starting in 2018.

Casualty Losses

Casualty losses are damage to property caused by fire, theft, vandalism, earthquake, storm, floods, terrorism, or some other “sudden, unexpected, or unusual event.” Taxpayers who itemize can take a deduction for their uninsured casualty losses. Insured losses are not deductible. Uninsured casualty losses are deductible only to the extent they exceed 10% of your adjusted gross income for the year. In 2015, about 72,323 taxpayers claimed a casualty loss deduction, for a total of more than $1.6 billion. The Republican tax bill eliminates this deduction starting in 2018. However, casualty losses will remain deductible if Congress passes special disaster-relief legislation, as it did after Hurricanes Harvey and Irma.

Educator Expense Deduction

Kindergarten through grade 12 teachers can deduct up to $250 of what they pay out of their own pockets for books, supplies, equipment, and other materials used in the classroom. Teachers may also deduct expenses for participating in professional development courses. This is an above-the-line deduction that may be claimed without itemizing. The Republican tax bill eliminates this deduction starting in 2018.

State and Local Taxes

Taxpayers who itemize may deduct from their federal income tax the amount of state and local taxes they paid during year. Alternatively, they may deduct their state sales taxes. In 2015, over 42 million taxpayers took a deduction for state and local taxes for a total of over $352 billion. The Republican tax bill eliminates this deduction starting in 2018. However, homeowners will be allowed to deduct property taxes up to a maximum of $10,000 per year.

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