Tax Law Changes You Can Expect to Affect Your Tax Return

The Tax Cuts and Jobs Act will begin affecting your taxes for tax year 2018, meaning the first few months of 2019 could be a bit of a stressful time for people who will be affected by some of its changes. It’s important that you read up on the changes implemented in the tax code and learn how they could affect you so you aren’t blindsided when you fill out your tax paperwork.

Here is some information from a tax service in Des Moines, IA about some of the biggest changes associated with the Tax Cuts and Jobs Act:

  • 20 percent deduction: Partnerships, S corporations and sole proprietorships may be eligible for some (or all) of the 20 percent deductions of qualified business income created in the legislation. This reduces the amount of taxable income you have and does not get listed as a business expense.
  • Business meals: Taxpayers are still able to deduct 50 percent of the cost of client and business meals if that taxpayer or one of the taxpayer’s employees is present and the food and beverages are not “lavish.” These could be meals provided to any current or potential consultant, client, customer or other business contact. Employee meals are also now 50 percent deductible, down from the previous 100 percent deduction.
  • Entertainment: Unfortunately, entertainment costs are no longer deductible. Food and beverages provided during these entertainment events, however, are not classified as entertainment if purchased separately from the event. So buying hot dogs and soda at a baseball game, for example, is deductible because it’s not included with the ticket, but the tickets to the game itself are not deductible.
  • Mortgage interest: From now through 2025, you are able to deduct mortgage interest payments on up to $750,000 in acquisition indebtedness for homes purchased after December 14, 2017. You’re also able to deduct up to $100,000 of home equity interest if the funds are used to buy, build or improve the home substantially.
  • Alimony: For any divorces executed or modified after December 31, 2018, alimony will be tax-free to the recipient and not deductible for the payer. This is a reverse of the previous rules, which has led to many divorces getting fast-tracked this year so alimony payers would still be able to take advantage of the deduction.
  • Itemized deductions: Certain miscellaneous deductions are no longer available, at least until 2025. These include work clothes and uniforms, job-seeking expenses, professional society or union dues, unreimbursed job expenses, safe deposit box rental fees, tax preparation fees for personal taxes, fees for investing advice and investment expenses.
  • Hobbies: Hobby expenses that do not qualify as cost of sales are not deductible under the new law.

Looking for more tips about preparing your taxes in accordance with the new legislation? Contact the team at Accounting & Tax Professionals, PLC today for the help you need. Our tax service in Des Moines, IA will be happy to assist you in any way we can.

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