The document summarizes changes to itemized deductions for 2018, including: - The medical expense deduction threshold decreased to 7.5% of AGI from 10% - State/local income tax deductions are now capped at $10,000 - Mortgage interest deductions are capped at interest from loans of up to $750,000 It then provides suggestions for taxpayers to potentially make up for lost deductions, such as increasing medical premiums, using a health savings account, taking a portion of mortgage interest as a home office deduction, and itemizing every other year by pushing expenses between years.

1. Itemized deductions
2018 CHANGES

2. This year the following changes were
made:
 Medical expense deduction is now subject to 7.5% rather than 10% of
adjusted gross income (AGI)
 State and local income taxes are capped at $10,000
 Mortgage interest is capped on interest of up to $750,000 ($375,000 MFS)
of mortgage debt
 Incurred to buy or improve a first or second residence.
 The old limit was $1 million.
 The interest deductions of $100,000 ($50,000 MFS) for home equity debt
has been eliminated.

3. This year the following changes were
made:
 The casualty and theft losses are now limited to people who live in federal
disaster area
 Job expenses and misc. deductions subject to the 2% AGI floor has been
eliminated.
 Deductions are no longer phased out for high income earners.

4. Itemized deductions
IDEAS TO MAKE UP LOST DEDUCTIONS

5. Medical expense deduction is now subject
to 7.5% rather than 10% of AGI
 This is good news to those with high health expenses. This means that the
limitations on your medical expenses have decreased.
 Example:
 Joe has an AGI of $20,000, previously Joe could only deduct expenses over
$2,000. Now he is able to deduct expenses over $1,500.
 If your medical expenses are below 7.5% of your AGI, you can increase
your premiums so you have less out of pocket expenses and increased
business health insurance deduction. However, be sure this makes financial
sense for you.
 On the other hand, you can get a high deductible plan and use a health
savings account to minimize your taxes.

6. Mortgage interest is capped on
interest of up to $750,000
 This limitation will mostly affect people who live in big cities like New York,
Los Angeles, Chicago, etc.
 Most other people fall under this threshold and will not be affected by this
limitation.
 If you are disqualified from itemizing and you own your business, consider
deducting a portion of your interest payments as a home office deduction.
 To qualify as a home office, the space must be used regularly and exclusively
for your business.
 It must be your principal place of business or a place where you physically meet
with patients, clients or customers on a regular basis.

7. Don’t take a home equity loan
 Do not take a home equity loan to pay off other debt as this is no longer
deductible

8. Job expenses and misc. deductions subject
to the 2% AGI floor has been eliminated.
 Consider talking to your employer to adopt an accountable reimbursement
plan.
 This plan will allow your employer to reimburse you for business expenses.
 The reimbursements must be documented and any excess reimbursements
must be returned on a timely basis.
 An accountable reimbursement plan document must be maintained on file.
 Your employer will be able to deduct the expense and you do not have to
report additional wages.
 If you own your business, you are both the employer and the employee
and can take advantage of business reimbursements.
 You are not excluded from documentation.

9. State and local income taxes are capped at
$10,000
 Keep an eye on the state and local income taxes you pay
 Now is a good time to see if you qualify for exemptions for your real estate
taxes
 A lot of taxpayers don’t realize that if they live in the home, they could get owner
occupied exemptions
 Seniors also get breaks on their real estate taxes
 If you have a home office, a portion of your real estate taxes can still be
deducted on your business return.

10. Itemize every other year
 Push forward most of your deductible expenses to the next tax year
 Pay what is necessary in the current year.
 In this way, you will have enough to itemize every other year.
 Charitable contributions lend very well to this strategy.

11. No more personal exemptions
 You no longer have an exemption for each person you claim on your tax
return.
 If you are not eligible for credits for having children – earned income
credit, child tax credit, child care credit, premium tax credit and education
credit, you will be better off letting your own children file their own return.
 This will also apply if your income exceeds the thresholds for these credits.