Tax Code Changes You Should Know: 7 Eliminated Deductions
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This is the third entry in a five-part series about changes to the U.S. tax code from the Tax Cuts and Jobs Act. Topics of the other articles include itemized deductions, exemptions, and child/dependent credits; mortgage interest deductions; the Alternative Minimum Tax; and qualified business income.
The Tax Cuts and Jobs Act (TCJA) eliminates miscellaneous itemized deductions subject to the 2-percent floor. That will affect several things you might be used to deducting.
Tax Preparation. Tax preparation fees or tax advice are no longer deductible. However, if your tax bill is itemized and you have tax preparation fees that are business-related, such as those for your rental property or completing Schedule C, you can deduct those business-related tax preparation fees.
Investment Fees and Expenses. As with tax preparation, investment fees and expenses are no longer deductible. Of note, though, commissions paid when purchasing securities still add to the basis of the security and reduce your profit when the security is sold. So in effect, they are deductible.
Military Uniform Items. Only certain uniform items, such as rank, corps devices, and swords, were deductible. They no longer are.
Unreimbursed Travel Expenses. Reservists and guardmembers who travel more than 100 miles for drill or other reserve-related travel and have unreimbursed expenses continue to be able to account for them as an adjustment to income and they are deductible. Active duty servicemembers report unreimbursed travel expenses, if any, as a miscellaneous itemized deduction, and therefore they are not deductible.
Job-Hunting Expenses. When you separate from military service, you'll probably have job-hunting expenses. Job-hunting expenses such as printing, postage, résumé preparation fees, and travel no longer are deductible.
Work-Related Education. Education expenses to maintain or improve your skills are no longer deductible. Often, retiring military officers would get a certification that relates to their present work and take a deduction for those expenses. As mentioned, you can't do that anymore.
Other Work-Related Items. Other deductions that no longer will be available include home office expenses if you are an employee, professional fees, and depreciation on computers or cellphones used for your employer's benefit.
Some miscellaneous itemized deductions are not subject to the 2-percent floor, and they still are deductible. Most of these are pretty uncommon, but here are a few that could apply:
- Gambling losses up to the amount of gambling winnings
- Casualty and theft losses on income-producing property
- Impairment-related work expenses
The TCJA is slated to expire in 2025, and at least in theory, these deductions will come back.
An additional note: Two deductions I've seen on the tax returns of military members that I've reviewed that are not deductible - ever - are haircuts and gym memberships. The Courts have ruled these expenses are inherently personal in nature even if your job requires you to maintain short hair and meet physical fitness standards.
The good news in all this is your record-keeping requirements just went down and, with the increased standard deduction, for many, your tax bill won't go up.