What's new in the swinging, swirling world of Income Taxes?


Whatever you think of the Tax Cuts and Jobs Act that became U.S. Federal law in December (you know, the one officially called "To Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018"), it's likely to affect you for better or worse. While it provides widely publicized tax cuts, many deductions will be disappearing for the solo entrepreneur and others. We're talking about deductions that will disappear from your next return. Your return due April 17, 2018, might be your last chance to take them.

Their relevance to you depends on your particular situation, such as whether you're paying off a mortgage, but we'll bet there's something on this list that you should learn more about, or discuss with your tax preparer and/or financial advisor.

We're not tax experts or financial advisors ourselves, so in pulling together this information, we've relied a lot on an article published by Freelancer's Union, " Grab these 20 freelance tax deductions before they are gone." Also bear in mind that rules and information change over time, so before making any decision, be sure you're up-to-date with fresh information from authoritative sources. For example, we found some very out of date information at IRS.com. That surprised us, until we remembered that the real IRS site is IRS.gov. You'll also find old documents at IRS.gov, but they are plainly labeled "archival or historical."

Personal Exemptions. What the increased standard deduction giveth, other provisions taketh away. After this year, you won't be able to deduct the $4,050 each in personal and dependency exemptions for your family members.

State and Local Taxes. There are different types of state and local taxes: income taxes, property taxes, sales taxes, etc. The deductibility of state sales taxes has an on-and-off history. For a century, they were deductible. For a few decades since the 1980s, they were not. Then they were deductible again. If we understand correctly, next year all these taxes will be counted together and their deductibility will be capped. You'll be able to claim up to a total of $10,000. The National Association of Realtors website states that this includes "state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers and is not indexed for inflation."

Mortgage Interest. The deduction is currently capped at $1,000,000. Next year, the cap will be $750,000. Yes, there are voice actors to whom this might apply.

Home Equity Loan Interest. The mortgage-interest deduction cap will be even lower if you also have a home equity loan or line of credit, because the two interest amounts are added together in figuring the $750,000 limit. And the home equity loan interest can be figured into it only if the equity loan was used to pay for home improvements.

Expenses Incurred as an Employee. Some freelancers also hold full-time or part-time jobs with an employer. If you incur significant expenses for that employer and are not reimbursed, you've been able to deduct them if they were more than 2% of your adjusted gross income. Next year, sorry, no deduction at all. Try to get an expense account.

Moving Expenses. Unless you're a member of the armed forces, moving will get more expensive, because the cost of moving won't be deductible.

Natural Disasters. Next year, you won't be able to deduct losses caused by just any natural disaster. It will have to be in a presidentially designated disaster zone. But if you had a loss previously, and couldn't get credit because you claimed the standard deductions, check into this. See our note about retroactivity, below.

Alimony Payments. If you might get divorced after next December (Dec 31, 2018), check with your lawyer and your accountant. You won't be able to write deductibility into your alimony agreement anymore.

Other Itemized Deductions. Sorry, professional dues won't be deductible next year. Neither will investment service fees. Nor unreimbursed qualified employee education expenses (ouch!). And, for that matter – the sharpest if not deepest cut of all – tax preparation fees won't be deductible either.

NOTE: Some provisions in the new bill are retroactive to 2016 and 2017. For example, previously if you claimed the standard deduction with limitations, you could not claim a personal casualty loss from a Federally declared national disaster. Reportedly now you can, even if that loss was in 2016.

So get out your pencil, calculator and address book. If you haven't filed yet, you may have some planning to do! But remember, most or all of the changes we've discussed here will apply to your next tax return – the one that will be due in 2019.

Do you have a comment or suggestion? Please send to Marketing@EdgeStudio.com.

ADDITIONAL READING:

Voice Over Freelancer Tax Tips, 2015 Edition (Two parts, beginning Feb 6 2015)
https://www.edgestudio.com/blogs/voiceover/category/business-money

Accounting & Taxes 101 for Voice Over Artists (last updated 2013)
https://www.edgestudio.com/archive/accounting-taxes-101-voice-over-artists

Financial planning for the voice-over professional (June 3, 2016)
https://www.edgestudio.com/blogs/financial-planning-voice-over-professional

Post new comment

close

Please before adding your comment.

How to Reach Us

Call us 888-321-3343
Email us training@edgestudio.com

Click for Edge location information...

Meet Your Coaches

Edge Alumni Work Everyday

Get free educational
voice over newsletters!

Get free, educational voice over newsletters

Where should we send them?