Changes in Itemized Deductions for Individuals in 2018

There are numerous changes effective for tax year 2018 that will affect taxpayers who normally itemized deductions. Here is a summary of the changes.


In 2017, property taxes, and state and local income taxes were deductible. Taxpayers can elect to deduct sales tax in lieu of state income tax.

In 2018, the deduction for taxes is retained but capped at $10,000 for the year (PERSONALLY). Foreign real property taxes may not be included. The Act prohibits claiming a 2017 itemized deduction on a pre-payment of income tax for 2018 or other future taxable year in order to avoid the dollar limitation applicable for taxable years beginning after 2017.

Home Mortgage Interest

In 2017, the IRS allowed interest on $1M of acquisition debt on primary and second home and interest on $100K of home equity debt.

In 2018, the IRS will allow interest on $750K of acquisition debt on primary and secondary homes. The law grandfathers interest on up to $1M of acquisition debt for loans prior to December 15, 2017. The deduction for home equity debt is repealed.

Charitable Contributions

In 2017, the law allowed charitable contributions generally not exceeding 50 percent of a taxpayer’s adjusted gross income (AGI).

In 2018, the law continues to allow charitable contributions and increases the 50 percent of AGI to 60 percent. It bans charitable deductions for payments made in exchange for college athletic event seating rights. It also repeals certain substantiation exceptions.

Personal Casualty and Theft Losses

In 2017, casualty and theft losses were allowed to the extent each loss exceeded $100 and the sum of all losses for the year exceeded 10 percent of the taxpayer’s AGI.

The law suspends personal casualty losses from 2018 through 2025, except for casualty losses attributable to a disaster declared by the President under Section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

Tier 2 Miscellaneous Deductions (those subject to the two percent of AGI threshold)

In 2017, you could deduct certain employee business expenses, tax preparation fees, investment expenses and certain casualty losses.

None of these is deductible from 2018 through 2025.

Medical Expenses

In 2017, medical expenses were allowed when they were in excess of 10 percent of AGI.

Medical deductions are retained for 2017 and 2018 with an AGI threshold of 7.5 percent regardless of age. The threshold increases to 10 percent after 2018. A 7.5 percent threshold also applies for AMT purposes for 2017 and 2018.

Phase-out of Itemized Deductions

In 2017, itemized deductions were phased out for higher income taxpayers.

The phase-out is suspended from 2018 through 2025.

As always, give us a call to discuss these changes and how they impact your taxes.