PAHomePage.com – 2018 was the first year under a new tax law, which was the largest overhaul of tax law in decades. Experts say if you don’t prepare for tax day now, you could be in for a costly surprise.
One of the biggest changes to the new tax law is the change to charitable donations. Often times, people give not just out of sense of helping, but also for a tax break. However, before you write that check before the end of the year, you need to be aware of the changes in the tax law because in most cases, the IRS won’t allow you to claim them on your return any more as a deduction.
Some itemized deductions will be eliminated
Gone for 2018 are itemized deductions for unreimbursed employee expenses and other miscellaneous deductions, including the deduction for theft and personal casualty losses. However, certain casualty losses may still be claimed in federally declared disaster areas.
For decades, generous people have donated billions of dollars to non-profits. Under the 2017 Tax Cuts and Jobs Act, many people will not be able to itemize such as donations when filing in 2019.
The government says the loss of those deductions will be off-set by an increase in the standard deduction.
“Plan on donating in 2018 when you still have a couple days to make that donation to get you over the $12,000 if you’re single or $24,000,” Mark Mihalka with Liberty Tax said.
The Standard Deduction will almost double
For individuals, the standard deduction will increase from $6,350 currently to the new amount of $12,000. For married couples, it will increase from $12,700 to $24,000. For heads of household, it will increase from $9,350 to $18,000.
Non-profits are worried that the new law means they’re going to see smaller donations, which they depend on to provide services. The Salvation Army has put a plea on its website asking for donations.
“In 2017, the Salvation Army raised more in the last two days of the year than in the entire month of November, and contributions during November and December dwarfed the entire rest of the year.”
-Lt. Col. Ward Matthews, Secretary for National Community Relations & Development
“I don’t think it’s going to hurt in that aspect and the people that donate larger amounts are still going to keep donating because they are going to be over that standard deduction,” Mihalka said.
Some other changes to note in the new tax law:
- Parents who have a child under the age of 17 can now have a child tax credit of $2,000, which is up from $1,000
- Any dependents that are 17 and older also receive a $500 credit
- The tax brackets have also changed, to see what bracket you are now a part of, click here
- The current deductions for student loan interest will be kept in the new tax law, and tuition waivers for graduate students will remain tax free
- The new tax law will allow taxpayers to deduct medical expenses exceeding 7.5 percent their adjusted gross income, which will help those with expensive medical bills
- For all homeowners with existing mortgages, there won’t be any changes to the current Mortgage Interest Deduction. For those with new mortgages on a first or second home, the Mortgage Interest Deduction will be available for mortgages up to $750,000, down from the current limit of $1 million. However, home equity loan interest will no longer be deductible for anyone.