As tax season approaches, it’s essential to stay informed about the latest updates and changes in the tax code. In this article, we will review what you can and can’t do when filing your personal taxes, including deductions that are no longer allowed and those that have been reinstated through recent legislative amendments. Understanding these changes will help you navigate the tax filing process more effectively and ensure compliance with the updated regulations.
Deductions No Longer Allowed
1. Unreimbursed Employee Expenses: Previously, you could deduct expenses incurred for work purposes that your employer did not reimburse. However, this deduction is no longer available, regardless of whether the expenses exceeded 2% of your adjusted gross income. Note that many individuals may no longer be eligible to itemize deductions.
Exceptions to the Rule
Certain exceptions exist for specific categories of individuals:
– Reservists in the armed forces
– Persons with disabilities having impairment-based work expenses
– Fee-based state or local government officials
– Qualified performing artists
If you fall into any of these categories, you can still deduct relevant expenses. You will need to use either Form 2106 or 2016-EZ and include the computed deduction on line 11 of Schedule 1 (Form 1040).
Expenses That Were Never Deductible
There are several expenses that were never eligible for deduction, including:
1. Commuting Expenses: Generally, costs related to commuting between your home and workplace are not deductible. However, there may be limited exceptions for certain individuals mentioned earlier.
2. Lobbying Expenses: Expenses incurred for lobbying purposes, such as traveling to Washington DC to influence legislation, are not deductible.
3. Campaign Contributions: Contributions made to political campaigns are not considered charitable deductions. Additionally, personal expenses related to advertising in convention bulletins, dinners, or program events are also non-deductible.
4. Fines and Penalties: Personal expenses resulting from traffic tickets, parking fines, or other penalties are not deductible.
5. Club Dues: Membership dues for clubs are generally not deductible, even if business meetings are conducted there. However, the cost of meals during genuine business discussions may qualify for deduction.
6. Moving Expenses: In most cases, moving expenses are no longer deductible unless you are in the military and have official orders. This change has affected job seekers’ ability to deduct costs associated with relocating for better employment opportunities.
Certain deductions have been reinstated through recent amendments:
1. Medical Expenses: Medical expenses exceeding 7.5% of your adjusted gross income can now be deducted. This includes costs related to fertility treatments, inpatient alcoholism treatment, anti-smoking programs (prescription drugs only), and service animals. However, expenses such as over-the-counter medications (excluding insulin) and cosmetic surgery remain non-deductible.
2. Gambling Losses: Gambling losses can be deducted, but only to the extent that they are equal to or exceed your gambling winnings. This allows you to offset some of the taxable income generated from gambling activities.
3. Casualty and Theft Losses: Deductible for income-producing property, such as rental property, vacant lots, or losses incurred due to being in a Federal Disaster Zone. Losses on stocks, bonds, and Ponzi schemes can also be deducted to a certain extent.
4. Home Offices: Deductions for home offices are available to individuals with businesses reported on Schedule C, E, or F. This applies to sole proprietors, gig workers, rental property owners, K-1 recipients who actively participate in the business, and farmers.
Understanding the changes in the tax code is crucial when filing your personal taxes. While certain deductions,
such as unreimbursed employee expenses, have been eliminated, there are exceptions and newly reinstated deductions that may apply to specific situations. Staying informed about these changes will help ensure accurate tax filing and enable you to take advantage of available deductions while complying with updated regulations. Consider consulting a tax professional or using reputable tax software to navigate the complexities of the tax filing process effectively.