CPA David Young of the New York State Society of CPA’s discussed the top tax deductions available for your 2017 tax return Monday during News 8 at Sunrise.
Young began by clarifying these are deductions for your 2017 tax return, not 2018. “The tax bill that was passed at the end of 2017 goes into effect for tax year 2018, so that’s tax filed one year from now,” he said.
For those who itemize their deductions, charitable contributions is a big one Young said. “If you bring things to salvation army, you’re going to have a receipt for your clothing for your church, get all that together. It’s an easy deduction, your medical and dental expenses. So if they exceed 7.5 percent of your adjusted gross income, that’s a pretty high threshold, but if you’re in that category you could go ahead and deduct it. Miscellaneous itemize deductions, this is the last year it’s in play, so that’s going to be deductions for your tax prep fees. If you have investment fees, unreimbursed employee expenses, those are big deductions we’re going to lose next year, but they’re in play for the 2017 tax return.”
Here are some of the other top tax deductions for your 2017 return:
Mortgage Interest and Points: The mortgage interest that you pay on your home, as well as a portion of the points you paid to reduce your interest rate, may be deductible if you meet the criteria listed in IRS publication 936, “Home Interest Mortgage Deduction.” This applies to mortgage debt of up to $1 million for home loans taken before December 15, 2017, and mortgages of up to $750,000 taken after that date.
Home Equity Loans: Interest on home equity debt of up to $100,000 may be deducted in 2017. For next year, experts say interest on HELOC’s should still be deductible, provided that homeowners use the proceeds of the loan to make home improvements, and the first mortgage balance plus the HELOC does not exceed $750,000.
Gambling Losses: Was it a bad year at the race track, but a good year with lottery tickets? You can deduct gambling losses with sufficient documentation, but only to the extent that you offset other gambling winnings.
Real Estate and Personal Property Taxes: Generally, taxes that are levied through homeownership, such as real estate taxes are deductible.
State/Local Taxes: You can deduct your state and local taxes paid in the previous year, or you can deduct the sales taxes that you paid (preferable for states which levy no state income tax). If you choose to deduct sales taxes, consult the 2017 Schedule A Instructions to get a baseline value, and then add the tax on big ticket items that were purchased during 2017.
The following deductions have even greater value, as they are “above the line” deductions. These deductions are subtracted off of your adjusted gross income directly, and are available to you whether or not you itemize.
Moving Expenses: If you find a new job, and that job is more than 50 miles away from your current home, you can deduct some moving expenses. See publication 521, “Moving Expenses” for details. The Tax Cuts & Jobs Act (TCJA) eliminates this deduction for the 2018-2025 tax years.
Retirement Plan Contributions: Contributions to tax-deferred retirement accounts may be deductible. Roth IRA’s are not since they are funded with post-tax dollars. This deduction has been kept in place by the TCJA.
Alimony: Amounts that you pay to a former spouse, excluding child support payments, may be deductible. See Tax Topic 452 for details. The alimony deduction remains in effect through 2018, but disappears for couples divorced in 2019 or after.
Health Savings Account Deductions: Your 2017 contributions to your HSA are deductible, although employer contributions are not. To qualify, you must be covered by a high deductible health plan and have no other health coverage, except certain permitted coverage.
Self-Employment Expenses: As a self-employed person, you pay both the employer and employee component of payroll taxes. Fortunately, you get to deduct the 50 percent considered the employer portion. In some cases, you can also deduct retirement fund and health insurance expenses.
Educator Expenses: K-12 educators can deduct up to $250 in qualified and unreimbursed educational expenses. These can be items used in the classroom or payments for professional development courses taken within your field. The TCJA has not made any changes to this deduction.
Interest on Student Loans: This can be deducted up to $2,500.
Reservists Expenses: Certain unreimbursed business expenses of performing artists, as well as reservists and fee-based government officials, are handled separately from other deductible business expenses.
If you have any questions about these deductions, contact a trusted CPA. For more information, visit the NYSSCPA website, click here.