Tax season is almost here, and that means it's time for Americans to look for the best ways to reduce their taxable income to save on their taxes. There are dozens of deductions, credits, and other tax breaks available to the general public, and many of them are quite lucrative for putting money back in your pocket.
However, major tax law changes in 2018 took away some of the favorite tax deductions people had. Some hoped that those much-loved provisions might come back in 2019, but at least right now, there doesn't seem to be much hope of getting to use these tax deductions again. Below, we'll go through the benefits of some of these now-extinct provisions.
1. Personal exemptions
One of the biggest and most-used tax breaks for taxpayers was the personal exemption. This simple provision allowed people to reduce their taxable income for themselves and for those who rely on them financially. The reduction was $4,050 per person in the last year for which it was available, but starting in 2018, personal exemptions went away.
The explanation that lawmakers gave for getting rid of personal exemptions had two main points. The doubling of the child tax credit from $1,000 to $2,000 per child essentially replaced the tax savings from the personal exemption for eligible children. In addition, an increase to the standard deduction helped those who didn't itemize get some additional tax savings.
Even with those offsetting provisions, some taxpayers were still much worse off without the personal exemption, but lawmakers haven't taken any action to restore the provision and don't look likely to anytime soon.
2. Miscellaneous itemized deductions
The increase in the standard deduction made it less likely for people to itemize at all, but another factor in that decision involved the elimination of some of the items that went toward your total itemized deductions. It used to be that you could take itemized deductions for things like job-search costs, tax-preparation expenses, and unreimbursed employee costs to the extent that they were above 2% of your adjusted gross income. However, getting rid of miscellaneous itemized deductions meant getting none of these breaks -- although amounts that most taxpayers claimed here were fairly modest.
3. Casualty and theft losses
Under old tax law, you could take as an itemized deduction a portion of any money that you lost through theft or due to a catastrophic event like a natural disaster. The deduction was allowed only if the amount lost was more than $100 and only to the extent that it exceeded 10% of your adjusted gross income. But that still let many people use the break.
Now, though, casualty or theft losses are available only if the president declares a disaster area that includes your property. That excludes many less severe weather events, as well as most common theft and other criminal activity.
4. Moving expenses
Under old law, anyone could claim moving expenses as a deduction to gross income as long as they qualified. The main requirement was that you'd be moving for a new job, and that job happened to be at least 50 miles further from your old home, which was near your old job.
Now, though, very few people are allowed to take the deduction at all. Only active members of the military can take it -- and that's especially valuable as you don't have to itemize in order to claim it.
5. Home equity loan interest
Last, the old tax laws allowed deductions on a limited amount of home equity debt for any purpose. You didn't have to use the loan proceeds on the home but could use it for unrelated purposes, like taking a vacation or buying a vehicle.
The new law limits deductions for home equity loans to situations in which you use the proceeds to buy a home or build or make substantial improvements to the property.
Look elsewhere for tax breaks
2019 is the second tax year that these deductions won't be around, and taxpayers shouldn't hold their breath waiting for them to ever come back. Instead, it's always smart to know exactly what's happening in the tax world and make sure to stay ahead of trends rather than getting caught behind them.