While most provisions of the Tax Cuts and Jobs Act (TCJA) have gone into effect last year and either apply through 2025 or are permanent, there are two significant tax changes under the act for 2019. Here’s a quick overview.

1. Deductions on medical expenses

It is no secret that health care costs increase every year, therefore, claiming any tax breaks related to health care is essential. However, there are requirements on how one can claim medical expenses that were already difficult for many taxpayers to meet, and it may be even harder to achieve this year.

The TCJA provisionally reduced the threshold from 10% of adjusted gross income (AGI) to 7.5% of AGI. Inopportunely, the reduction applies only to 2017 and 2018. That means that in 2019, the threshold returns to 10% — unless signed legislation changes the law-  extending the 7.5% threshold. Only qualified, unreimbursed expenses that exceed the limit is accepted as deductible.

It is important to note that to deduct medical expenses you must itemize deductions. Also, the only way to save tax is if your total itemized deductions exceed your standard deduction. With the near doubling of the standard deduction for 2018 through 2025, it may not benefit many taxpayers anymore to itemize.

2. Alimony deductions

Before 2019, alimony was deductible by the ex-spouse paying it and the ex-spouse receiving the payment was taxed on the additional income. Child support, on the other hand, hasn’t been deductible by the payer or taxable income to the recipient.

Under the TCJA, alimony from divorce agreements or modifications made after December 31, 2018, are not deductible — and will be excluded from the recipient’s taxable income. Meaning alimony will be treated the same way as child support.

Because the recipient ex-spouse would typically pay income taxes at a rate lower than that of the paying ex-spouse, the overall tax bite will likely be greater under this new tax treatment. This change is permanent.

TCJA impact on 2018 and 2019

A majority of the revisions written in the TCJA have already gone into effect in 2018, but not all. Our team will assess the impact of the TCJA when you file your 2018 tax return. Contact us if you have questions on these changes or more: adminteam@capatacpa.com or 949-364-0334.