Changes to Itemized Deductions for Tax Year 2018


The tax law that was passed by Congress and signed into law by President Trump on December 22, 2017 called the Tax Cuts and Jobs Act (H.R. 1) made several changes to itemized deductions. Below is the UPDATED information.

Overall Limitation of Itemized Deductions

For tax years 2018 through 2025, overall itemized deductions are no longer limited based on adjusted gross income (AGI).

Medical and Dental Expenses

For tax year 2018, the threshold to deduct allowable out-of-pocket medical and dental expenses is 7.5% of adjusted gross income (AGI). Beginning in 2019, it is increased to 10% of AGI.

Limitation on State and Local Income Tax Deduction, Sales Tax Deduction and Property Tax Deduction

For tax years 2018 through 2025, the new law limits the overall amount that can be claimed as an itemized deduction for ALL state and local income taxes OR sales tax AND property taxes. The limit is $10,000 ($5,000 if married filing separately).

NOTE: If you pay any property taxes on your rental property, those are still deductible as a rental expense and are not subject to the $10,000 overall limitation.

Limitation of Mortgage Interest Deduction

For tax years 2018 through 2025, home equity loan interest is no longer deductible on either old loans or new loans!

Home mortgage interest on up to $1,000,000 ($500,000 if married filing separately) of acquisition indebtedness on your primary residence and a second home or vacation home is deductible if the loan was taken out BEFORE December 15, 2017.

For new mortgages taken out on or after December 15, 2017, home mortgage interest is only deductible on loan amounts up to $750,000 ($375,000 if married filing separately).

Charitable Contributions

For tax years 2018 through 2025, the adjusted gross income (AGI) limitation on cash contributions is increased from 50% to 60%.

Personal Casualty and Theft Loss Deduction Limited

For tax years 2018 through 2025, only qualifying casualty losses in a federally declared disaster area may qualify for a deduction. Theft losses and other casualty losses are no longer deductible.

Most Miscellaneous Itemized Deductions Repealed

For tax years 2018 through 2025, all deductions subject to the 2% adjusted gross income (AGI) limitation are repealed and no longer deductible. This includes unreimbursed employee job expenses, job hunting expenses, tax preparation fees, investment related expenses, certain legal fees, and expenses related to hobbies and not-for-profit rentals.