Spring 2019 marked the first tax season where individual filers had to negotiate some different rules regarding investment-specific interest and taxes. Did you see an impact or a change? As a refresher, here are some of the major changes (along with a little perspective and a few tips for next time around).

Home- and Mortgage-Related Deductions

  • Mortgage interest deductions were capped
    In the past, homeowners who took itemized deductions could count interest payments on debt related to buying, building or “substantially improving” a home — on debt up to $1 million. That’s been capped at $750,000 and applies to homes purchased after Dec. 15, 2017. Homes bought prior to the new law are grandfathered, but this may impact people’s decision to look for new homes, as they could see a reduction in the mortgage interest they can claim going forward.
  • SALT deductions were capped
    State and local taxes (SALT), no matter how much of them you had to pay, aren’t the same caliber of deduction anymore. You can now only claim deductions on the first $10,000 in SALTs—unwelcome news if you live in a high-tax state.

Do I Even Want to Itemize at All?

While some may feel crimped with the loss or limitation of deductions related to mortgage debt and taxes, others may find that the more generous standard deductions offered by the TCJA (Tax Cuts & Job Act) of 2017 may hold some relief.

If you took a bigger-than-expected hit when you filed in 2019, you might want to see if taking the standard deduction, rather than itemized deductions, is worth a shot. Under the TCJA, standard deductions jumped to $12,000 for single filers, $18,000 for heads of household and $24,000 for joint filers (tax brackets may have shifted in your favor, too). It might be a simpler and cheaper option than trying to get over the now-higher bar for itemized deductions.

Make a Strategy for 2020 (And Get Help if You Need It!)

If you found your pockets lighter after your first go-round with the TCJA’s new limitations, now is the time to start finding ways to offset some of the damage. Some years you may want to itemize, while in others you go for the standard deduction. If you regularly make and track your charitable deductions, there may be ways to bundle your giving so that you can maximize your writeoffs (we’ll explore this one in more detail in an upcoming post). While the standard deduction scenario has become simpler, itemizing can be more complicated. It’s usually a good idea to spend a few minutes talking with your tax preparer or financial planner so you can better navigate the new landscape of restrictions when it’s time to file for tax year 2019.