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Updated January 11, 2024 Reviewed by Reviewed by Lea D. UraduLea Uradu, J.D. is a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, and Tax Writer.
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Part of the Series Tax Deductions and Credits GuideTax Credits for Parents/Students/Dependents
Tax Deductions for Real Estate
Tax Deductions for Retirement Savings
The Tax Cuts and Jobs Act (TJCA) was signed into law in 2017. The act nearly doubled the standard deduction and eliminated or limited many itemized deductions. As a result of the act, many people who used to itemize on Schedule A took the standard deduction instead.
Below is a list of exemptions, deductions, and credits that were eliminated, limited, reduced, or otherwise changed by the passage of the TJCA.
Exemptions and deductions reduce the amount of taxable income you claim on your annual tax return. Tax credits are subtracted from the taxes you owe. All three of these elements were impacted by the TCJA, and each has a different effect on the amount of taxes you pay.
For example, let's say you're a single filer whose taxable income is $100,000. This means you fall into the 22% tax bracket. This would result in you owing $17,394.
A $10,000 deduction (or exemption) would reduce your income to $90,000, resulting in a tax bill of $15,113. With a tax credit of $10,000, your AGI would remain at $100,000, but your taxes would be just $7,394—the amount you get by subtracting $10,000 from the amount of your tax bill, $17,394.
Though an exemption is not technically a deduction, it functions similarly by allowing you to reduce your taxable income by the exemption amount.
The new law suspended personal and dependent exemptions from 2018 to 2025. In this case, if the exemption had been $4,050 for yourself and each dependent you claimed, due to the TCJA, it is now zero.
Keep in mind, that even though you can't claim a personal or dependent exemption, you may be eligible for other tax benefits.
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The TCJA doubled the child tax credit (CTC) from $1,000 to $2,000 for those who qualify, including parents with higher incomes than in the past.
That limit was increased again for the 2021 tax year to $3,000 for children ages six through 17 and $3,600 for children under the age of five. These reverted to the original amount of $2,000 in 2022. Income thresholds are $200,000 for single parents and $400,000 for those married filing jointly. Beyond those levels, the credit is reduced.
The child tax credit is refundable, up to $1,600 for 2023 and $1,700 for 2024. This means that even if you don't owe taxes due to low income, you can still receive partial credit, providing (or increasing) a refund.
Remember, this is a tax credit that directly reduces the total amount of taxes that you owe. In addition, you can also claim a $500 tax credit for dependents aged 18 and older for any dependents who:
The TCJA raised the standard deduction for taxpayers. Single filers can claim a standard deduction of $13,850 for the 2023 tax year (filed in 2024) and $14,600 for 2024 (filed in 2025). For married couples filing jointly, the deduction is $27,700 for 2023 and $29,200 for 2024.
The federal income tax system and some states have higher standard deductions for people at least 65 years old and those who are blind. Under federal guidelines, if you are blind or 65 or older and single, the amount added to your standard deduction is $1,850 for the 2023 tax year and $1,950 for 2024. If you are married filing jointly, and one of you is 65 or older, your standard deduction goes up by $1,500 for 2023 and $1,550 for 2024.
Regardless of age, you may discover that the new standard deduction is larger than the combined total of your itemized deductions, even if you deduct mortgage interest.
Here is a closer look at how Schedule A itemized deductions changed with the TCJA. There are also some suggestions for what to do instead.
In the past, your employer could reimburse you up to $20 a month or $240 annually for bicycle commuting expenses on a tax-free basis. In addition, your employer could take a deduction for offering the benefit. The TCJA suspended that benefit for both bike commuters and their employers. It also removed employer deductions for parking, transit, and carpooling.
Commuting expenses considered "necessary for ensuring the safety of the employee" will continue to be deductible by employers, but the TCJA doesn't spell out which expenses qualify, and the IRS has offered no real guidance to date.
Employees continue to receive tax-free benefits for parking, transit, and carpooling from their employers. The exclusion amounts are $300 monthly for 2023 and $315 for 2024.
However, because companies no longer receive a deduction for offering the benefit, most have little incentive to offer it. Your employer can also offer bicycle-commuting benefits in any amount, and this expense is deductible.
Costs associated with relocating for a new job used to be deductible on Form 1040 as an above-the-line deduction, which you could subtract from your gross income to calculate your adjusted gross income (AGI).
This no longer applies. In fact, the distance you move doesn't even matter. Moving expenses are simply not deductible. The only exception is if you are active-duty military and are moving for a service-related reason. In this case, the deduction still applies.
In the past, the person making alimony payments received an above-the-line deduction, and the person receiving the alimony counted the money as taxable income. As of 2019, the paying spouse no longer receives a deduction, and the receiving spouse no longer declares the payments as taxable income for any divorce after Dec. 31, 2018.
Payments initiated before 2019 are not affected. Child support payments are also nondeductible by the paying spouse and tax-free to the recipient.
One suggested tactic for the paying spouse to pay alimony and get a kind of deduction involves transferring to the receiving spouse a portion of the funds in their individual retirement account (IRA). This is accomplished via a division of property agreement or potentially a qualified domestic relations order (QDRO).
The transfer is tax-free for the paying spouse. It effectively provides them with a deduction because they are giving away money that they would have had to pay taxes on eventually.
In addition, the transfer of the IRA funds is tax-free for the receiving spouse. Moreover, they would have the benefit of tax-free growth until withdrawing funds. The receiving spouse would be responsible for taxes upon the withdrawal of any funds (including a 10% penalty if money is withdrawn before age 59½).
This may not be an ideal move (due to the need to pay taxes) if the receiving spouse needs money right away. And, the paying spouse will lose some of the savings they've been building for their retirement years.
The deduction for medical expenses remains. You can deduct unreimbursed medical expenses that exceed 7.5% of your AGI on Schedule A. The deduction is claimed on Lines 1–4 of Schedule A.
Keep in mind that the medical expense must be qualified deductible expenses. Most cosmetic surgeries do not qualify.
The Schedule A deduction for state and local taxes (SALT) used to be unlimited. These include income taxes (or general sales taxes), real estate taxes, and personal property taxes. With the passage of the TCJA, the SALT deduction is now limited to $10,000 ($5,000 if married and filing separately).
This can be a real problem for people in states with high income or property taxes, such as New York and California.
Some states had sought to offset the cap by allowing residents to contribute to a state charitable fund in lieu of taxes. The payments could then be deducted as charitable contributions on federal returns. But in June 2019, the Department of Treasury and the IRS issued final regulations curtailing the practice.
Four states launched a constitutional separate challenge to the SALT cap. These efforts failed when a federal court dismissed the lawsuit in September 2019.
New York adopted a workaround called the Employer Compensation Expense Tax, a voluntary employer-side tax designed to create a tax credit for workers. The move takes advantage of the fact that businesses have no cap on deducting state and local taxes.
Connecticut enacted its mandatory Pass-Through Entity Tax Credit, which creates a tax on pass-through entities while also providing a tax credit for the entity's partners.
The TCJA eliminated the deduction for foreign taxes paid on real estate. Previously, you could deduct foreign property taxes on Schedule A just as you could in the United States, either for a regular residence or a second home.
Foreign property taxes may now be considered a deductible qualified housing expense on Form 2555, Foreign Earned Income, for purposes of the foreign housing exclusion for certain U.S. citizens or residents who live outside the U.S. and earn wages abroad.
Qualified housing expenses include rent, utilities (other than phone charges), residential parking, furniture rental, and other items.
The qualified housing expense deduction involves an interpretation of tax law. You should consult a qualified tax expert before claiming this deduction.
Previously, you could deduct interest on mortgage debt of up to $1 million ($500,000 for married taxpayers filing separately). This still applies to any loan originated on or before Dec. 16, 2017. But if you originated a new mortgage after that date, the new limit of $750,000 applies ($375,000 if married and filing separately).
Because you can only take the mortgage interest deduction if you file Schedule A and itemize, the change does not matter to people who take the standard deduction.
Before the TCJA, you could deduct interest on a home equity loan and home equity line of credit (HELOC) just as you could with a mortgage, no matter how you used the money. This deduction has been eliminated, at least in part. Since 2018, you cannot deduct interest on these types of loans except under certain circumstances, even if you took out the loan before that year.
If you have or take out a home equity loan or line of credit and use the money to buy, build, or substantially improve your main or second home, the interest on it may still be deductible.
Note that to take the deduction, the home equity loan must be on the property you are renovating. For example, you can't take out a home equity loan on your city apartment to finance fixing up your ski house.
You can also refinance an existing mortgage and deduct the interest, provided the refinanced amount isn't greater than your old loan balance (in other words, provided you are not taking any cash out).
The comprehensive Schedule A deduction for casualty and theft losses went away following the passage of the TCJA. Previously, you could deduct losses related to a disaster or theft to the extent that those losses were not covered by insurance or disaster relief.
The deduction is still available if you live in a federally designated disaster zone. Often, these designations are made county by county, so even if the county next to you is a federally declared disaster area, your county may not be.
Miscellaneous Schedule A itemized deductions subject to a 2% of AGI threshold were eliminated in 2018.
This includes deductions in the following categories:
A few miscellaneous itemized deductions remain after 2018:
Teachers can still deduct unreimbursed educational expenses up to $300 per year. Qualified expenses are professional development courses, books, supplies, computer equipment, and supplementary materials you use in the classroom.
Along with the new and larger standard deduction, several others are better under the TCJA.
The federal tax brackets remained unchanged in 2023 (and 2024) at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Income thresholds, however, change every year. The income thresholds trend upwards.
Yes, the Tax Cuts and Jobs Act is still in effect and will remain so until the end of 2025 for the majority of the changes that were enacted.
The TCJA changed the tax brackets and the income thresholds for brackets. For example, if you are now in the 12% tax bracket, you would have previously been in the 15% tax bracket.
Whether deductions eliminated by the TCJA or other changes impact you negatively depends on your financial situation and the types and amounts of deductions you might be able to take.
It's worth noting that the changes implemented by this legislation are currently set to expire after Dec. 31, 2025, unless Congress decides to extend them. The IRS's Tax Reform: Basics for Individuals and Families publication offers more information.
Article SourcesTax Credits for Parents/Students/Dependents
Tax Deductions for Real Estate
Tax Deductions for Retirement Savings
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The Smith Maneuver is a Canadian tax strategy that makes interest on a residential mortgage tax-deductible. Borrowers need a readvanceable mortgage to use it.
The alternative fuels credit, as outlined by the Internal Revenue Code, is a nonrefundable tax credit for non-alcohol alternative fuel users.
A qualified electric vehicle allows the owner to claim a nonrefundable tax credit.The federal first-time homebuyer tax credit was ended in 2010 but there are other state and federal programs designed to encourage homeownership.
Business expenses are costs incurred in the ordinary course of business. Business expenses are tax-deductible and are always netted against business income.
The general business credit is the total value of the separate business tax credits a business claims on its tax return for a specific year.
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