With the federal tax filing deadline rapidly approaching, many are wondering how the recent, drastic changes to the tax code will affect their 2018 returns. While the standard deduction was raised for 2018, several other common deductions were altered, like mortgage interest deduction and the deduction for state and local taxes. For some taxpayers, the higher standard deduction will be enough to offset any changes to their deductions but for others, it could mean a higher tax liability for 2018. If you’re concerned about your deductions, you should know that there are some deductions, known as “Above the Line” deductions that can reduce your Adjusted Gross Income (AGI) even if you take the standard deduction. Here are a few above the line deductions you might want to ask your tax professional about:
Whether you’re getting close to retirement or you’re just starting your career, an individual retirement account (IRA) can be a great way to save money and defer taxation. When it comes to your 2018 taxes, some or all of the IRA contributions you made can be taken as an above the line deduction in conjunction with the standard deduction. For 2018, the contribution limit is $5,500 and it will be increasing to $6,000 for 2019. If you made any contributions to your IRA last year, be sure to ask your tax professional if you can take advantage of this deduction because there are a number of situations that can disqualify you.
If you work for yourself, you may be able to take certain deductions above the line, like a portion of any self-employment taxes you paid, self-employed health insurance premiums, or self-employed retirement plan contributions. There are a number of above the line deductions available to the self-employed, and the qualifications can be quite complex, so be sure to talk to your tax professional to find out if you can take them.
If you made alimony payments to your ex-spouse in 2018, you may be able to deduct them from your AGI. This deduction is available to the spouse paying alimony, not the recipient, and there are some caveats related to funds paid for childcare expenses, so it’s best to talk to a tax professional if you think you may qualify.
With the rise in popularity of high-deductible health insurance plans, many people use a Health Savings Account (HSA) to put away money for their healthcare expenses. If you contribute to an HSA, you may be able to write off those expenses but you will need to fill out additional forms. Your tax professional will let you know which ones, so be sure to check in with them before filing your 2018 taxes.
If some or all of the deductions you used in previous years have been changed in the new tax law, you may be concerned that you’ll end up owing more when you file. If that’s the case, don’t fret because you may be able to take advantage of these and other above the line deductions. While Crash Proof Retirement ®, its owners, employees, and contractors are not Certified Public Accountants, we present this list to you in hopes that it will give you some important questions to ask your tax professional when you file.