Have you filed your 2018 taxes yet? If not, then you may want to reacquaint yourself with the tax changes, known as the Tax Cuts and Jobs Act, which went into effect on January 1, 2018. Here’s what you need to know.
Higher standard deduction
Do you normally itemize your deductions on your taxes? Then you should be aware of changes to the standard deduction. The new standard deduction has doubled and is now $12,000 for single filers and $24,000 for those who are married and filing jointly. Also, be aware that New York State will allow you to itemize your deductions even if you do not itemize your deductions on your federal income tax return.
Home mortgage interest deduction
The home mortgage interest deduction is still in place, but there have been modifications. Starting in 2018, the interest paid on a home equity line of credit will no longer be eligible for a deduction. In addition, any interest debt from a home mortgage originating after December 15, 2017, will only be eligible up to $750,000. Any debt that originated before that time stays at the previous level of up to $1,000,000.
State and local taxes
How state and local taxes (often referred to as SALT) can be deducted has also changed. Previously, the deduction was unlimited. As of 2018, homeowners can only deduct up to $10,000 in property taxes and either sales taxes or income taxes. New York residents will take the biggest hit, as New Yorkers have the highest average deduction for SALT.
Deferring capital gains taxes
If you own an investment property, you will be able to continue deferring capital gains taxes with the 1031 tax-deferred exchanges. However, be aware that is only for real property. All other property will no longer qualify for the deferment including trucks, rental cars, aircraft, and machinery.
New York State Charitable Gifts Trust Fund
In response to the federal Tax Cuts and Jobs Act, New York State created the Charitable Gifts Trust Fund. The fund accepts donations and uses the money to improve health care and public education in the state. Beginning with the 2018 tax year, taxpayers who make donations to the fund can claim a state itemized deduction in the amount of the full donation for the tax year. In addition, taxpayers can claim a state income tax credit equal to 85 percent of the donation for the following tax year. For more information about this fund, visit the New York State Department of Taxation and Finance website.
Modification to New York State qualified moving expenses
If you moved in 2018 and incurred moving expenses or received reimbursement for your qualified moving expenses, there is a modification to how this is calculated. See Form IT-225 for more information.
Talk to a tax professional
The changes outlined above are just some of the bigger changes in the tax law for 2018. To ensure that you are properly filing your taxes for 2018, talk to your tax advisor. Don’t forget – the deadline to file is April 15.
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