July 15 Filing Deadline Looming

As the July 15 income tax filing deadline draws near, taxpayers need to be aware of a few things that may have slipped their minds during the COVID-19 crisis, especially available tax deductions.

First, this filing deadline is for your 2019 income taxes, both federal income taxes and Ohio state income taxes. The filing deadline was pushed to July 15 from the normal April 15 this year due to the COVID-19 crisis.

Additionally, since this is only the second year of filing taxes under the Tax Cuts and Jobs Act (TCJA) of 2017, some taxpayers may have forgotten that the standard deduction is much higher now and most “miscellaneous” deductions have disappeared.

Miscellaneous deductions are a collection of tax deductions that were available to all taxpayers for many years prior to passage of the TCJA. They included popular deductions such as the home office deduction, and unreimbursed business expenses for employees (like personal vehicle use and union dues).

In addition to the miscellaneous tax deductions, other popular tax breaks were eliminated by TCJA, including deductions for alimony, moving expenses related to job relocation, and in certain circumstances home equity loan interest.

It is important to note that the loss of these deductions, for many taxpayers, is offset by the doubling of the standard deduction and by lower marginal tax rates.

Below is a list of the most popular deductions that are no longer available:

State and local tax deduction. This was not lost entirely but was capped at $10,000. Those most affected are residents of states with high income taxes and high property taxes.

Mortgage interest deduction.  This was not lost entirely but the loan amount eligible for the interest deduction was dropped to $750,000. Those most affected: purchasers of high-cost residential real estate.

Alimony. This is no longer deductible for the payor, and the recipient need not declare it as income. Affects only divorce agreements made after Dec. 31, 2018.

Casualty loss deduction. If you lost or sustained damage to property that was not covered by insurance, you could previously deduct the out-of-pocket costs for repairs. No more.

Moving expenses related to a job relocation. You may still deduct these costs if you are a military member and the move is related to your military service.

AVAILABLE MISCELLANEOUS ITEMIZED DEDUCTIONS:

  • Home office deduction (still available to the self-employed, but not to taxpayers who are W-2 employees of a company that allows or requires them to work from home)
  • Job search expenses
  • Educational expenses
  • Safe deposit box rental
  • Tax preparation fees
  • Trustee administration expenses for an IRA
  • Investment fees and expenses
  • Hobby expenses

For more details, or to discuss your options, contact our advisors.