The Tax Cuts and Jobs Act (TJCA) was signed into law in 2017. The act nearly doubled the standard deduction and eliminated or limited many itemized deductions. As a result of the act, many people who used to itemize on Schedule A took the standard deduction instead.
Below is a list of exemptions, deductions, and credits that were eliminated, limited, reduced, or otherwise changed by the passage of the TJCA.
Key Takeaways:
- The Tax Cuts and Jobs Act eliminated or limited many deductions, credits, and limits, including the standard deduction, until Dec. 31, 2025.
- Personal and dependent exemptions are now obsolete, although the Child Tax Credit remains.
- Eliminated deductions include those for moving expenses and alimony, while limits were placed on deductions for mortgage interest and state and local taxes.
- Key expenses no longer deductible include those related to investing, tax preparation, and hobbies.
- Gambling expenses are deductible, and the threshold for charitable deductions increased.
How Tax Exemptions, Deductions, and Credits Work
There are three common ways to reduce the amount of tax you owe: exemptions, deductions, and credits. All three are still broadly available after the passage of the TCJA, though certain types were eliminated or changed.
Many taxpayers can claim multiple types of deductions, credits, or exemptions on their taxes.
Tax exemptions and deductions reduce the amount of taxable income you claim on your annual tax return. Tax credits are subtracted from the taxes you owe. The type of deduction, credit, or exemption, as well as your income, will impact which ones are best for you to claim on your taxes. Each will change your tax bill in different ways.
For example, let's say you're a single filer whose taxable income is $100,000. This means you fall into the 22% tax bracket in both 2024 and 2025. This would result in you owing $17,394.
A $10,000 deduction (or exemption) would reduce your income to $90,000, resulting in a tax bill of $15,113. With a tax credit of $10,000, your AGI would remain at $100,000, but your taxes would be reduced from $17,394 to $7,394.
Personal Exemptions Under TCJA
Though an exemption is not technically a deduction, it functions similarly by allowing you to reduce your taxable income by the exemption amount.
The TCJA suspended personal and dependent exemptions from 2018 to 2025. However, even though you can't claim a personal or dependent exemption, you may be eligible for other tax benefits.
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Child Tax Credit
The TCJA doubled the child tax credit (CTC) from $1,000 to $2,000 for those who qualify, including parents with higher incomes than in the past.
That limit was increased again for the 2021 tax year to $3,000 for children ages six through 17 and $3,600 for children under the age of five. These reverted to the original amount of $2,000 in 2022. Income thresholds are $200,000 for single parents and $400,000 for those married filing jointly. Beyond those levels, the credit is reduced.
The child tax credit is refundable, up to $1,700 for 2024 and 2025. This means that if your tax bill is lower than the amount of the credit, you receive the difference as a tax refund. For example, if you can claim the $1,700 child tax credit but your tax bill is only $700, the first $700 of the CTC would lower your tax bill to $0. You would receive the remaining $1,000 as a tax refund.
Remember, this is a tax credit that directly reduces the total amount of taxes that you owe. In addition, you can also claim a $500 tax credit for dependents who:
- Are age 18 or older
- Have social security numbers
- Are dependent parents or other qualifying relatives you support
- Are dependents you support but who are not related to you
Eligible taxpayers can claim the Credit for Other Dependents as well as the Child and Dependent Care Credit and the Earned Income Credit.
Higher Standard Deduction
The TCJA raised the standard deduction for taxpayers; this amount has since been raised to account for inflation. Single filers can claim a standard deduction of $14,600 for 2024 (filed in 2025) and $15,000 in 2025 (filed in 2026). For married couples filing jointly, the deduction is $29,200 for 2024 and $30,000 for 2025.
The federal income tax system and some states have higher standard deductions for people at least 65 years old and those who are blind. Under federal guidelines, if you are blind or 65 or older and single, the amount added to your standard deduction is $1,950 for 2024 and $2,000 for 2025. If you are married filing jointly, and one of you is 65 or older, your standard deduction goes up by $1,550 for 2024 and $1,600 for 2025.
Regardless of age, you may discover that the new standard deduction is larger than the combined total of your itemized deductions, even if you deduct mortgage interest.
Impact of Tax Cuts and Jobs Act on Itemized Deductions
Unlike the standard deduction, which is set at preset amounts that can be claimed by all taxpayers, itemized deductions are expenses that taxpayers incur on an individual level, such as the mortgage interest deduction or charitable donations. When filing your taxes, you can claim either the standard deduction or itemized deductions but not both.
Many itemized deductions, which are reported on Schedule A, were changed or eliminated under the TCJA. However, if you itemize instead of taking the standard deduction, you may still be able to reduce your tax bill by claiming other deductions that are still available.
Commuter Tax Benefits
Before the TCJA, employers could reimburse employees up to $20 a month or $240 annually for bicycle commuting expenses on a tax-free basis. Employers could take a deduction for offering the benefit as well.
Under the TCJA, businesses can deduct qualified bicycle commuting reimbursements as a business expense. However, those reimbursements must be reported as part of employees' wages and are subject to income and employment tax. suspended that benefit for both bike commuters and their employers.
The Tax Cuts and Jobs Act also removed employer deductions for parking, transit, and carpooling.
Commuting expenses considered "necessary for ensuring the safety of the employee" will continue to be deductible by employers. However, the TCJA doesn't spell out which expenses qualify, and the IRS has offered no real guidance to date.
Employees can continue to receive tax-free benefits for parking, transit, and carpooling from their employers. The exclusion amounts are $315 per month for 2024 and $325 per month for 2025.
However, because companies no longer receive a deduction for offering these transportation benefits, they have no tax incentive to offer it.
Moving Expenses Deduction
Costs associated with relocating for a new job used to be deductible on Form 1040 as an above-the-line deduction, which you could subtract from your gross income to calculate your adjusted gross income (AGI).
This no longer applies. In fact, the distance you move doesn't even matter. Moving expenses are simply not deductible. The only exception is if you are active-duty military and are moving for a service-related reason. In this case, the deduction still applies.
Alimony Deduction
In the past, the person making alimony payments received an above-the-line deduction, and the person receiving the alimony counted the money as taxable income. As of 2019, the paying spouse no longer receives a deduction, and the receiving spouse no longer declares the payments as taxable income for any divorce after Dec. 31, 2018.
Payments initiated before 2019 are not affected. Child support payments are also nondeductible by the paying spouse and tax-free to the recipient.
Transfer IRA Assets
However, the paying spouse can pay alimony and get a kind of deduction if they transfer the funds to the receiving spouse's individual retirement account (IRA). This can be accomplished via a division of property agreement or potentially a qualified domestic relations order (QDRO).
The transfer is tax-free for the paying spouse. It effectively provides them with a deduction because they are giving away money that they would have had to pay taxes on eventually.
In addition, the transfer of the IRA funds is tax-free for the receiving spouse. Moreover, they would have the benefit of tax-free growth until withdrawing funds. The receiving spouse would be responsible for taxes upon the withdrawal of any funds (including a 10% penalty if money is withdrawn before age 59½).
However, there are drawbacks to using this method. If the receiving spouse needs to use the money right away, they will need to pay taxes and perhaps hefty penalties to withdraw the funds. The paying spouse also will lose some of the savings they've been building for their own retirement years.
Medical Expenses Deduction
The deduction for medical expenses remains. You can deduct unreimbursed medical expenses that exceed 7.5% of your AGI on Schedule A. The deduction is claimed on Lines 1–4 of Schedule A.
Keep in mind that the medical expenses must be qualified deductible expenses. Most cosmetic surgeries do not qualify.
SALT Taxes Deduction
The Schedule A deduction for state and local taxes (SALT) used to be unlimited. These include income taxes (or general sales taxes), real estate taxes, and personal property taxes. With the passage of the TCJA, the SALT deduction is now limited to $10,000 ($5,000 if married and filing separately).
This can be a real problem for people in states with high income or property taxes, such as New York and California.
Some states had sought to offset the cap by allowing residents to contribute to a state charitable fund in lieu of taxes. The payments could then be deducted as charitable contributions on federal returns. But in June 2019, the Department of Treasury and the IRS issued final regulations curtailing the practice.
Four states launched a constitutional separate challenge to the SALT cap. These efforts failed when a federal court dismissed the lawsuit in September 2019.
New York adopted a workaround called the Employer Compensation Expense Tax, a voluntary employer-side tax designed to create a tax credit for workers. The move takes advantage of the fact that businesses have no cap on deducting state and local taxes.
Connecticut enacted its mandatory Pass-Through Entity Tax Credit, which creates a tax on pass-through entities while also providing a tax credit for the entity's partners.
Foreign Property Tax and Housing Expenses
The TCJA eliminated the deduction for foreign taxes paid on real estate. Previously, you could deduct foreign property taxes on Schedule A just as you could in the United States, either for a regular residence or a second home.
However, foreign property taxes may now be considered a deductible qualified housing expense on Form 2555, Foreign Earned Income, for purposes of the foreign housing exclusion for certain U.S. citizens or residents who live outside the U.S. and earn wages abroad.
Qualified housing expenses include rent, utilities (other than phone charges), residential parking, furniture rental, and other items.
Foreign property taxes may now be considered a deductible qualified housing expense on Form 2555, Foreign Earned Income, for purposes of the foreign housing exclusion for certain U.S. citizens or residents who live outside the U.S. and earn wages abroad.
Qualified housing expenses include rent, utilities (other than phone charges), residential parking, furniture rental, and other items. X
The qualified housing expense deduction involves an interpretation of tax law. You should consult a qualified tax expert before claiming this deduction.
Mortgage Interest Deduction
Previously, you could deduct interest on mortgage debt of up to $1 million ($500,000 for married taxpayers filing separately). This still applies to any loan originated on or before Dec. 16, 2017. But if you originated a new mortgage after that date, the new limit of $750,000 applies ($375,000 if married and filing separately).
Because you can only take the mortgage interest deduction if you file Schedule A and itemize, the change does not matter to people who take the standard deduction.
HELOC Interest Deduction
Before the TCJA, you could deduct interest on a home equity loan and home equity line of credit (HELOC) just as you could with a mortgage, no matter how you used the money. This deduction has been eliminated, at least in part. Since 2018, you cannot deduct interest on these types of loans except under certain circumstances, even if you took out the loan before that year.
If you have or take out a home equity loan or line of credit and use the money to buy, build, or substantially improve your main or second home, the interest on it may still be deductible.
Note that to take the deduction, the home equity loan must be on the property you are renovating. For example, you can't take out a home equity loan on your city apartment to finance fixing up your ski house.
You can also refinance an existing mortgage and deduct the interest, provided the refinanced amount isn't greater than your old loan balance (in other words, provided you are not taking any cash out).
Casualty, Theft Deduction
The comprehensive Schedule A deduction for casualty and theft losses went away following the passage of the TCJA. Previously, you could deduct losses related to a disaster or theft to the extent that those losses were not covered by insurance or disaster relief.
The deduction is still available if you live in a federally designated disaster zone. Often, these designations are made county by county, so even if the county next to you is a federally declared disaster area, your county may not be.
Miscellaneous Itemized Deductions
Miscellaneous Schedule A itemized deductions subject to a 2% of AGI threshold were eliminated in 2018.
Unreimbursed Job Expenses
Work-related expenses you paid out of your own pocket are no longer deductible. These include:
- Travel
- Transportation
- Meals
- Union and professional dues
- Business liability insurance
- Depreciation on office equipment
- Work-related education
- Home office expenses
- Costs of looking for a new job
- Legal fees
- Work clothes and uniforms
All of these are gone. Your best recourse is to ask your employer to reimburse you for these expenses. The reimbursement will be tax-free. You could also ask for a pay raise, but that would be taxable.
Investment Expenses
Investment expenses are fees for investment advice or management, tax or legal advice, trustee fees (i.e., to manage IRAs or other investments), or rental fees for a safe deposit box. These items are no longer deductible.
However, if you borrow money to buy an investment, interest on that loan (called investment interest) is deductible if you itemize. The deduction is limited to the amount of taxable investment income you earn for the year.
Tax Preparation Fees
Tax preparation fees include the cost of tax preparation software, hiring a tax professional, or buying tax publications. Also gone are deductions for electronic filing fees and fees you pay to fight the IRS, including:
- Attorney fees
- Accounting fees
- Fees paid to contest a ruling or to claim a refund
If you hire someone to prepare both your personal and business taxes, ask for a separate bill for each. Fees you pay to prepare your business return are fully deductible as a business expense.
Hobby Expenses
Income from a hobby must be reported, and you will have to pay taxes on it. However, expenses related to that hobby, up to the amount of income you earned each year, are no longer deductible. If you sell goods related to your hobby to customers, you can deduct the cost of those goods when calculating hobby-related income.
Itemized Deductions Still Available
A few miscellaneous itemized deductions remain after 2018:
- Gambling losses are still deductible under the TCJA up to the amount of your winnings for the year. Gambling losses are not subject to the 2% limit on miscellaneous itemized deductions.
- Interest on student loans continues to be tax-deductible ($2,500 or the amount of interest you pay during the year—whichever is lower) even if you don’t itemize deductions.
- The $300 classroom teacher deduction for classroom teachers is still in effect and available, even if the teacher doesn't itemize.
Note to Teachers
Teachers can still deduct unreimbursed educational expenses up to $300 per year. Qualified expenses are professional development courses, books, supplies, computer equipment, and supplementary materials you use in the classroom.
Improved Deductions
Along with the new and larger standard deduction, several other deductions are better for taxpayers under the TCJA.
- The estate tax exemption is $13.61 in 2024, rising to $13.99 million in 2025. This amount till revert to $5 million in 2026 (adjusted for inflation) if the changes from the TCJA are not extended.
- Student loan debt discharge due to death or disability has not been taxed since 2018. Previously, discharged debt due to disability or death was taxable to you or your estate.
- Itemized AGI deductions are subject to no limitations because of the TCJA, although other limitations may be imposed, depending on the deduction.
- Charitable contributions now include higher limit thresholds. Most gifts by cash or check can be up to 50% of your AGI.
Did Federal Tax Rates Decrease?
The federal tax brackets in 2024 and 2025 remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. However, the income thresholds that determine which of these brackets you fall into change every year. The income thresholds trend upwards to adjust for inflation.
Is the TCJA Still in Effect?
The Tax Cuts and Jobs Act will remain in effect until the end of 2025 for the majority of the changes that were enacted. Unless further legislation is enacted by Congress, the changes from the TCJA will revert to their pre-2018 state in 2026 (with amounts adjusted for inflation).
What Was the Tax Rate Before the TCJA?
The TCJA changed the tax brackets and the income thresholds for brackets. For example, if you are now in the 12% tax bracket, you would have previously been in the 15% tax bracket.
The Bottom Line
Whether deductions eliminated by the TCJA or other changes impact you negatively depends on your financial situation and the types and amounts of deductions you might be able to take. For many taxpayers, the large increase to the standard deduction made the biggest different in their taxes, eliminating the need for itemizing deductions.
The changes implemented by this legislation are currently set to expire after Dec. 31, 2025, unless Congress decides to extend them. The IRS's Tax Reform: Basics for Individuals and Families publication offers more information.