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Which federal tax deductions have been suspended by tax reform?

SOLVEDby TurboTax1754Updated 2 weeks ago

In December 2017, Congress passed the largest tax reform bill in over 30 years. Included in the bill was the suspension (repeal) of several federal deductions for tax years 2018–2025, which we've summarized below.

Keep in mind: While some states are following the IRS's lead by suspending the same deductions, other states have decided to keep certain tax breaks mentioned below. When you go through your state return, we'll make sure to include any tax deductions that are still valid in your state.

An exemption is a specific amount you get to deduct for each taxpayer and dependent on your return.

In tax year 2017, the exemption was $4,050 per taxpayer or dependent, subject to a phase-out at higher income levels. The 2018 exemption was set to increase to $4,150 before it was suspended (repealed) through tax year 2025 by tax reform legislation.

For many families, the higher standard deduction coupled with the increased Child Tax Credit and the new $500 Credit for Other Dependents is expected to offset the lost exemptions. However, this may not be true for everybody, especially families with older dependents.

This hypothetical example compares the associated tax savings for a married couple taking the standard deduction with an AGI of $50,000 and 2 child dependents under 18:

20192018 (if no repeal)2017
  • Standard deduction: $24,400 x 12% = $2,928
  • Exemptions: $0
  • Child Tax Credit ($2000 per child): $4,000

Tax savings: $6,928*

  • Standard deduction: $13,000 x 15% = $1,950
  • Exemptions: ($4,150 x 4) x 15% = $2,490
  • Child Tax Credit ($1000 per child) = $2,000

Tax savings: $6,440*

  • Standard deduction: $12,700 x 15% = $1,905
  • Exemptions: ($4,050 x 4) x 15% = $2,430
  • Child Tax Credit ($1000 per child) = $2,000

Tax savings: $6,335*


Same situation, except this time both dependents are 18 or older:

20192018 (if no repeal)2017
  • Standard deduction: $24,400 x 12% = $2,928
  • Exemptions: $0
  • Credit for Other Dependents ($500 per dependent): $1000

Tax savings: $3,928*

  • Standard deduction: $13,000 x 15% = $1,950
  • Exemptions: ($4,150 x 4) x 15% = $2,490
  • Child Tax Credit: $0

Tax savings: $4,440*

  • Standard deduction: $12,700 x 15% = $1,905
  • Exemptions: ($4,050 x 4) x 15% = $2,430
  • Child Tax Credit: $0

Tax savings: $4,335*

*For illustration purposes only. Does not take into consideration any other deductions/credits, other tax situations, or state/local taxes.

Miscellaneous deductions subject to the 2% limit, including unreimbursed job expenses (reported on Form 2106) have been repealed for tax years 2018–2025. Affected deductions include:

  • Job-search expenses
  • Home office
  • Union dues
  • Work-related travel, mileage, and transportation (including DOT per diem)
  • Work-related meals, entertainment, gifts, and lodging
  • Work-related tools and supplies
  • Specialized clothing or uniforms
  • Work-related education
  • Investment fees and expenses
  • Safe deposit box rental fees
  • Depreciation on computers used for work or investments
  • Membership in professional societies
  • Subscriptions to professional journals or trade magazines
  • Licenses and regulatory fees
  • Malpractice insurance
  • Tax-preparation fees
  • Tax advice fees
  • Educator expenses of more than $250
  • Appraisal fees for casualty losses or donations
  • Hobby expenses

Self-employed (Schedule C) filers can still deduct these business-related expenses as they have in the past. The repeal of unreimbursed work-related deductions only affects wage- and salary-earning employees who don't own a business or work as a contractor.

The moving expense deduction (Form 3903) has been repealed for tax years 2018–2025, except for military members who were ordered to move as the result of a permanent change of station (PCS). These filers can still deduct their moving expenses.

Interest on home equity loans or lines of credit are still deductible, but only if the loan is used to buy, build, or substantially improve the home and the total mortgage doesn't exceed $750,000.

If the loan proceeds are used for something else (for example, to pay off debt) in 2018–2025, the interest is not deductible.

The deduction for personal casualty or theft losses has been repealed in tax years 2018–2025, unless the loss occurred in a federally-declared disaster area.

Previously, uninsured losses exceeding $100 due to fire, theft, or natural disaster could be deducted if the total loss amount exceeded 10% of the AGI, regardless of location.

The deduction for entertaining business associates and clients has been repealed for tax years 2018–2025. Prior to that, businesses could deduct 50% of the face value of entertainment (like sports events, theater, or golf) and 100% of the ticket cost to qualified charitable events, if the purpose was business-related.

Business meals aren't considered entertainment and are still 50% deductible, provided certain conditions are met.

Meals provided for the benefit of employees will be 50% deductible in 2018–2025 and nondeductible after that. Formerly, these were 100% deductible.

Donations to college athletic departments and booster clubs in exchange for tickets (or the right to buy them) are no longer deductible in tax years 2018–2025.

Prior to that, taxpayers were able to deduct 80% of donations made to colleges and booster clubs if the donation procured tickets (or purchase rights) to college athletic events.

The Qualified Bicycle Commuting Reimbursement has been repealed for tax years 2018–2025.

Previously, bike commuters could deduct up to $20 a month in employer reimbursements for qualified bicycle commuting expenses if they didn’t receive any other transit-related employee benefits.

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