Good for Those Working From Home in 2025

With the anticipation of the expiration of the Tax Cuts and Jobs Act (TCJA), an important change may affect millions of American workers who spend part of their workweek at home. Prior to TCJA, W-2 employees were unable to deduct unreimbursed job-related expenses.

In the past, there were regulations in place that permitted W-2 employees to claim tax deductions for various unreturned work-related costs such as transportation, home office equipment, professional fees, organization memberships, work attire, online services, communication fees, reading materials, and food expenses.

Good for Home Buyers from Tax Deductions

Looking ahead to the year 2025, individuals looking to purchase a home could potentially benefit from a provision that limits the deduction of home mortgage interest to the initial $750,000 of debt ($375,000 for those filing separately as married).

Should the TCJA provisions expire, potential home buyers could benefit from an adjustment that raises the allowable deduction for mortgage interest to $1 million ($500,000 for those filing separately) on their mortgage loans.

Taking into account important factors such as inflation, rising home costs, and interest rate fluctuations, these variables can significantly influence potential homebuyers.

Moving Expense Tax Deduction Returns

In the event that the Tax Cuts and Jobs Act (TCJA) expires, individuals who move for work may once again have the opportunity to deduct the expenses and costs associated with relocation from their taxes.

In the span of the Tax Cuts and Jobs Act (TCJA) from 2018 to 2025, individuals in the armed forces were eligible to deduct these expenses solely on their federal tax returns. However, for those outside the military, any relocation costs covered by their employer were categorized as income and subject to taxation, according to experts.

Bad for High Net Worth Individuals from an Alternative Minimum Tax.

A separate tax system known as the alternative minimum tax (AMT) was created to guarantee that individuals with significant income contribute their fair portion of taxes. High-earning taxpayers are required to compute their tax liabilities using both standard tax regulations and AMT provisions, which restrict certain deductions. Ultimately, they must pay the greater of the two amounts calculated.

Following the implementation of the Tax Cuts and Jobs Act (TCJA), a significant decrease in the number of individuals impacted by the Alternative Minimum Tax (AMT) was observed.

Should the TCJA provisions come to an end, tax professionals warn that reverting the TCJA changes could potentially impact up to 7 million individuals, subjecting them to the Alternative Minimum Tax (AMT).

Individuals earning between $200,000 and $400,000 may find themselves impacted by the Alternative Minimum Tax (AMT), unlike during the implementation of the Tax Cuts and Jobs Act (TCJA)

Bad for the Economy from Uncapped State and Local Tax Deduction.

In accordance with the Tax Cuts and Jobs Act (TCJA), individuals were allowed to tax deduct a maximum of $10,000 in local and state taxes (SALT) on their federal income tax filings.

In states with high taxes, such as California and New York, the tax deduction is significant for individuals with high incomes. Previously, the majority of the SALT deduction benefit, amounting to 91%, was utilized by those earning over $100,000 and mainly residing in six states: California, New York, New Jersey, Texas, Illinois, and Pennsylvania.

Eliminating the cap could cost $197 billion over fiscal years 2024-2033. Failure to allocate funds for this expense may widen the deficit, potentially impeding economic and wage growth, as certain economists suggest.

This entry was posted on Thursday, July 25th, 2024 at 8:00 am and is filed under Tax and Life Changes, Tax Deductions and Credits, Tax News, Tax Tips and Tricks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.