Tax Deductions That Went Away After the TJCA

Mar 26, 2023 By Rick Novak

In 2017, the Tax Cuts and Jobs Act was passed and signed into law. Several itemized deductions were deleted or severely restricted, and the standard deduction was almost quadrupled. Several taxpayers who previously utilized Schedule A to itemize their deductions choose to take the standard deduction due to the tax change. The Tax Cuts and Jobs Act (TCJA) eliminates, limits, reduces, or otherwise alters a number of tax exemptions, deductions, and credits.

Exemptions and Credits

When you file your yearly tax return, you may claim exemptions and deductions that lower the taxable income. Tax credits are deducted from the total amount of taxes you owe. The TCJA affected all three of these aspects, each having a unique bearing on the total amount you pay.

Consider the case of a single taxpayer with a taxable income of $100,000. You are now in the 24% tax bracket, which is good news. You have an outstanding tax liability of $15,009, according to the tax calculation worksheet made available by the IRS.

Your taxable income would be reduced to $90,000 due to the $10,000 deduction (or exemption), resulting in a tax bill of $12,788. Your adjusted gross income would stay at $100,000 if you had a tax credit of $10,000, but you would only owe $5,009 in taxes. This is the sum obtained by deducting $10,000 from $15,009.

Personal Exemptions

Between 2018 and 2025, the new legislation will suspend personal and dependent exemptions. Although an exemption is not the same thing as a deduction in the strictest sense, it serves a similar purpose in that it allows you to lower the amount of income subject to taxation by the amount of the exemption you are eligible for. In this scenario, let's imagine that the exemption was $4,050 for you and each dependent you claim to be eligible for. That is now zero. But you should remember that even if you cannot claim a personal or dependent exemption, you may still be qualified for other tax advantages.

Child Tax Credit

For those who qualify, including parents with greater earnings than in the past, the Child Tax Credit (CTC) was increased from $1,000 to $2,000 under the TCJA. For the tax year 2021, this ceiling was raised again to $3,000 for children aged six through seventeen and $3,600 for children aged five and younger. During 2022 and 2023, they were reset to their initial value of $2,000 annually. The credit is lowered after reaching the income levels of $200,000 for single parents and $400,000 for married couples filing jointly.

Because of its refundable nature, the child tax credit may be used to provide a refund even if a taxpayer doesn't owe taxes due to a lack of income. This is so because the credit may be used against other tax obligations. Remember that this is a credit against your final tax bill, so it will reduce the amount you owe. Also, if your dependent is 18 or older and fulfills one of the following requirements, you may be entitled to a tax credit of up to $500 per qualifying dependent.

  • Possess a social security number
  • Supporting dependent parents or other eligible relatives
  • Are dependents you support but who are not connected to you?

Commuter Tax Benefits

Your company used to be able to pay you up to $20 per month or $240 yearly for bicycle commuting expenditures on a tax-free basis. However, this policy has since changed. In addition, your employer may be able to deduct certain costs associated with providing the benefit to you. This perk was taken away from bike commuters and their employers by the TCJA. Moreover, parking, public transportation, and carpooling deductions for employers were eliminated.

Commuting Expenses

The Tax Cuts and Jobs Act (TCJA) will allow employers to continue deducting employee commuting costs so long as those costs are deemed "necessary for ensuring the safety of the employee." However, the TCJA does not specify which costs qualify, and the IRS has not provided any real guidance yet.

Employer-provided parking, public transit, and carpooling advantages will continue to be tax-free to employees. In 2022, a monthly exclusion of $280 will be in effect, and in 2023, a monthly exclusion of $300 will be in place.

Moving Expenses Deduction

The costs connected with moving for a new job used to be deductible on Form 1040 as an above-the-line deduction, meaning they may be subtracted from your gross income to arrive at your adjusted gross income. However, this deduction has since been eliminated. Sorry, this is no longer relevant. It makes no difference at all how far you go. There is no way to deduct the costs associated with moving. The only time this does not apply is if you are a member of the armed forces on active duty and you are transferring because of your job. The deduction still stands in this situation.

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