Tax Cuts and Jobs Act: Suspended Deductions

Posted by Amy Henretty, CPA

The Tax Cuts and Jobs Act changed and suspended many deductions that taxpayers could take on their individual tax returns. The suspended deductions under the new law are set to expire January 1, 2026 unless otherwise stated. The information below details the changes to these deductions.

  • Personal exemption deductions for the taxpayer, spouse, and dependents have been suspended, resulting in zero personal exemptions.
  • A deduction for miscellaneous itemized deductions subject to the 2% of adjusted gross income (AGI) are suspended and not allowed.
  • The overall limitation on itemized deductions is suspended. Under prior law, the rule limited the total amount of otherwise allowable itemized deductions for certain higher-income taxpayers.
  • An exclusion for qualified bicycle commuting reimbursement is suspended.
  • The exclusion for qualified moving expense reimbursement has been suspended, except in the case of the Armed Forces of the United States on active duty who move pursuant to a military order and incident to a permanent change of station.
  • A deduction for moving expenses is also suspended unless it applies to a member of the Armed Forces of the United States.
  • Any taxpayer may deduct medical expenses to the extent they exceed 7.5% of the taxpayer’s AGI through December 31, 2018. This applies for AMT as well. Starting January 1, 2019, the threshold will increase to 10% of AGI.
  • The deduction for personal casualty losses has been modified. Any personal casualty loss that would have been deductible in a tax year prior to December 31, 2017 under the new law will be allowed as a deduction only to the extent it is attributable to a federally declared disaster.
  • The deduction for home equity interest has been suspended which means taxpayers may not claim a deduction for interest on home equity indebtedness. However, home equity loan interest deductions are still available for equity loans used for substantial improvements to a primary residence.
  • Beginning after December 15, 2017, the maximum acquisition debt is limited to $750,000 ($375,000 for taxpayers filing married filing separately). The grandfather rule for pre-December 16, 2017 acquisition indebtedness interest is applicable in which up to the prior $1 million can still be deducted. The $1 million ($500,000 married filing separately) of existing acquisition debt for refinancing continues to be grandfathered if the proceeds do not exceed the amount of refinanced debt.
  • The limit for deductions of cash charitable contributions increased from 50% to 60%. The increased 60% of contribution base limit won’t apply to contributions made in tax years after 2025.
  • The exclusion for discharge of certain student loans has been broadened under the new law to include discharges because of  death or disability. The exclusion will no longer apply for discharges after December 31, 2025.
  • The child tax credit has been increased to $2,000 from the previous $1,000 credit amount. The new act also implemented an increase in the threshold amount for the phaseout of the credit. The threshold amount for applying the phaseout is $400,000 for married filing joint ($200,000 for all other filers).

The above suspended deductions will impact the filing of all individual taxpayers for the next several years. If you have any questions or would like assistance on determining how these suspended deductions will impact your tax filing please give us a call.

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