Gambling Deductions Tax Reform

As a result of the December 20, 2017 Tax Reform legislation, the following items will affect your Tax Year 2019 Tax Return.

• Changes the Seven Tax Rates: The new rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. They will phase out in eight years.
• Doubles the Standard Deduction: The standard deduction amount is increased from $6,350 to $12,000 for Single and Married Filing Separately filers, $12,700 to $24,000 for Married Filing Jointly and Widow filers, and $9,350 to $18,000 for Heads of Household.
• Eliminates the Personal Tax Exemption: The doubled standard deduction replaces the personal tax exemption.
• Eliminates Some Itemized Deductions Subject to the 2% AGI floor for Eight Years
• Eliminates Income Phaseout on Total Itemized Deductions for Eight Years
• Decreases the Mortgage Loan Amount Limit for the Mortgage Interest Tax Deduction: For new loans starting in 2018, taxpayers can deduct their mortgage interest of a loan up to $750,000 ($375,000 for Married Filing Separately taxpayers). This is a decrease from the current loan amount of $1 million. It will go back to the original $1 million amount in 2026.
• Increases the Tax Deduction for Charitable Contributions: The limit for charitable cash donations to public charities and certain other organizations increases from 50% to 60% (except deductions combined with preferred seating at college sports events). The charitable standard mileage rate stays at 14% with no adjustment for inflation.
• Increases the Child Tax Credit: The Child Tax Credit is increased from $1,000 to $2,000 per child (first $1,400 is refundable). The credit will start to phase out at $400,000 and more than $200,000 for other taxpayers. This increased amount would phase out in eight years.
• Adds a New Tax Credit for Non-Child Dependents: There is a new $500 nonrefundable tax credit for non-child dependents/parents who are U.S. citizens. The credit can be applied to children over 17 years old, senior parents, or children with disabilities. The dependent’s Social Security Number (SSN) must be issued and provided to the IRS by the due date of a tax return in order to qualify for the credit.
• Reduces the State and Local Tax Deduction: State and local property taxes up to $10,000 can be deducted, in addition to income taxes or sales taxes.
• Decreases the Medical Tax Deduction Rate: The Medical Tax Deduction rate is decreased from 10% to 7.5% for 2017 and 2018 Tax Returns, regardless of age. It will rise back to 10% in 2019.
• Eliminates the Moving Expenses Deduction: You can no longer deduct moving expenses related to a new job (there are some exceptions for active duty military). These expenses include the use of a vehicle as part of a move. This will expire in 2025.
• Eliminates the Tax Deduction for Casualty and Theft Loss: All tax deductions for casualty and theft loss are eliminated (except for those losses attributable to a federal disaster as declared by the President) from 2018 to 2025.
• Eliminates the Tax Deduction for Educator Expenses
• Eliminates the Tax Deduction for Tax Return Preparation Expenses
• Doubles the Estate or “Death” Tax: The Estate Tax amount is doubled from $5.5 million to $11.2 million ($22.4 million for married taxpayers), which will increase with inflation. The doubled amount will expire on December 31, 2025.
• Eliminates the Individual Health Care Tax Penalty: The tax penalty for not having health insurance will be eliminated in 2019. This means you would still be required to pay the penalty in 2018 (for 2017 Tax Returns) and 2019 (for 2018 Tax Returns), but not in 2020 (for 2019 Tax Returns).
• Eliminates Roth IRA Reconversion: If you converted your traditional IRA to a Roth IRA, you can no longer reconvert it back to an traditional IRA. Initial conversions from traditional Roth IRA are not affected.
• Includes All Gambling Expenses as Deductible Losses Up to Amount of Total Winnings
• Eliminates Home Office Deduction for Employees
• Eliminates Business Mileage Rates As Itemized Deductions For Un-Reimbursed Employee Travel Expenses

1. If you itemize your deductions, you can offset your winnings by writing off your gambling losses. It may sound complicated, but TaxAct will walk you through the entire process, start to finish. That way, you leave nothing on the table. How much can I deduct in gambling losses?
2. The Tax Foundation is the nation’s leading independent tax policy nonprofit. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and global levels.
3. One itemized deduction that survived tax reform was the ability to deduct your gambling losses. You can tally your losses on the 'Other Miscellaneous Deductions' section of Form 1040 Schedule A. Note, however, that your bad betting luck only goes so far.
4. A gambler not in the trade or business of gambling (a 'casual gambler') can deduct wagering losses as a deduction not subject to the 2%- of - adjusted - gross - income threshold (i.e., not among miscellaneous itemized deductions the TCJA suspended for tax years 2018 through 2025) on Schedule A, Itemized Deductions, but only to the extent of the winnings.

Tax Reform Changes for Tax Years 2019 and 2020

Gambling Loss Deduction Tax Reform

• Eliminates the Tax Deduction for Alimony (only applies to payments required under a divorce or separation agreement made after the end of 2018)

What is Not Changing in Tax Reform

The Tax Cuts and Jobs Act brought significant changes to many individual tax regulations, including those dealing with the standard deduction and itemized deductions. There are several factors to consider that may change whether the standard deduction or itemized deductions are more beneficial for you beginning in 2018.

Here are items from the current tax code that will not change:

• Earned Income Tax Credit: The maximum amount is $6,444 for taxpayers filing jointly who have 3 or more qualifying children.
• American Opportunity Tax Credit
• Student Loan Interest Deduction
• Adoption Tax Credit
• Alternative Minimum Tax: The amounts permanently adjusted for inflation are $70,300 for Single and Head of Household filers, $109,400 for Married Filing Joint filers and widowers, and $54,700 for Married Filing Separately filers.
• Tax Deductions for 401K and IRA Retirement Savings Options
• Capital Gains and Dividend Rates
• Investment Interest Expense Tax Deduction
• Real Estate Tax Deduction for State and Local Property Up to $10,000
• Home Office Deduction for Self-Employed Taxpayers

Tax Reform Individual Tax Rate Schedule

In our very long and complex tax code, tax deductions come in all shapes and sizes, and have a lot of sticky rules attached to them. For example, business expenses must be ordinary (common and accepted in an industry) and necessary ...

In our very long and complex tax code, tax deductions come in all shapes and sizes, and have a lot of sticky rules attached to them. For example, business expenses must be ordinary (common and accepted in an industry) and necessary (helpful and appropriate for the trade or business) to be deductible. If your clients itemize deductions, they can deduct medical expenses paid for themselves, spouses and dependents to the extent they exceed 7.5% of adjusted gross income. Under the Tax Cuts and Jobs Act, you can no longer deduct miscellaneous employee business expenses subject to the 2% adjusted gross income threshold.

Review the following list of expenses to help your clients stay compliant and minimize their tax liability. Excerpts were taken from Publication 502, Medical and Dental Expenses, and Publication 529, Miscellaneous Deductions. Please refer to these publications for a more complete list of tax deductions.

Medical Expenses

Deductible

• Alcoholism Treatment: Amounts paid for inpatient treatment at a therapeutic center for alcohol addiction, including meals and lodging provided by the center during treatment.
• Fertility Enhancement: The cost of the following procedures to overcome an inability to have children:
• In vitro fertilization, including temporary storage of eggs or sperm.
• Surgery, including an operation to reverse prior surgery that prevented you from having children.
  
• Guide Dog and Service Animals: The cost of buying, training and maintaining a guide dog or other service animal to help a person who is visually impaired, hearing disabled or has another physical disability. Expenses include food, grooming and veterinary care to maintain the health of the animal so it can perform its duties.
  
• Stop Smoking Programs: However, you cannot include amounts paid for drugs that don’t require a prescription, such as nicotine gum or patches.

Not Deductible

• Weight Loss Programs: You’re not allowed to deduct the cost of a weight loss program if the purpose is the improvement of appearance, general health or sense of well-being. However, you can deduct the expenses if the weight loss treatment is for a specific disease diagnosed by a doctor (e.g. obesity, hypertension or heart disease).
• Nonprescription Drugs and Medicine (except for insulin): A prescribed drug requires a prescription by a doctor to be deductible.
• Health Club Dues: Includes amounts paid to improve your general health. or to relieve your physical or mental discomfort. and is not related to a medical condition.
• Cosmetic Surgery: Includes procedures directed at improving one’s appearance but does not meaningfully promote the proper function of the body or prevent or treat an illness or disease. Examples include face lifts, hair transplants, hair removal or liposuction. You can deduct cosmetic surgery if it is necessary to improve a deformity arising from a congenital abnormality, personal injury or disfiguring disease.
  

Miscellaneous Deductions

Deductible

• Gambling Losses to the Extent of Gambling Winnings: Gambling losses include wagers plus expenses incurred in connection with the conduct of a gambling activity, such as travel.
• Casualty and Theft Losses on Income-Producing Property: Investment property includes stocks, notes, bonds, gold, silver, vacant lots and works of art.
  
• Federal Estate Tax on Income in Respect of a Decedent: This is gross income the decedent would have received if the death didn’t happen and was not properly included on the decedent’s final tax return.
• Fines and Penalties: In general, fines and penalties paid to a government or specified non-government entity for the violation of any law are disallowed, except for the following situations:
• Amounts paid for restitution.
• Amounts paid to come into compliance with the law.
• Taxes due.
• Certain court orders where no government agency is a party.
• Home Office: You can take a home office deduction if you use part of your home regularly and exclusively for business purposes.
• Club Dues: The following organizations are not treated as clubs organized for business, pleasure, recreation or social purpose (unless one of the main purposes is for entertainment):
• Boards of trade
• Business leagues
• Chambers of commerce
• Civic or public service organizations
• Professional organizations
• Real estate boards
• Trade associations
  
• Losses from Ponzi-Type Investment Schemes: Deductible as theft losses from income-producing property.

Not Deductible

• Unreimbursed Employee Expenses are not Deductible, unless you fall into one of these categories:
• Armed Forces reservist
• Qualified performing artist
• Fee-basis state or local government official
• Employee with impairment-related work expenses
  
• Campaign Expenses: This applies to a candidate for any office and includes qualification and registration fees and legal fees.
  
• Commuting Expenses: The transportation cost going from your home to your main or regular place of work is not deductible. However, there is an exception is for Armed Forces reservists, qualified performing artists, fee-basis government officials and employees with impairment-related work expenses. They can deduct the additional cost of hauling tools, instruments, or other items in their car to and from work.
  
• Fines and Penalties:
• Amounts paid to settle your actual or potential liability for a fine or penalty (civil or criminal).
• Parking tickets and tax penalties.
• Restitution paid to come into compliance with the law (unless the amounts are specifically identified in the settlement agreement or court order).
• Reimbursement to the government for the cost of an investigation or litigation.
  
• Lobbying Expenses:
• Influence legislation.
• Participate or intervene in any political campaign for or against any candidate for public office.
• Attempt to influence the general public about elections and legislative affairs.
• Communicate directly with executive branch officials to try to influence official actions.
  
• Club Dues: This includes the membership in any club organized for business, pleasure, recreation or social purpose. Examples include athletic, luncheon, sporting, airline, hotel and country club.
• Political Contributions:

• Political contributions made to a political candidate, campaign committee or newsletter fund.
• Advertisements in convention bulletins and dinners and programs that benefit a political party or candidate.
  

Gambling Deductions Tax Reform Withheld

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Gambling Deductions Tax Reform Rules

Gambling Deductions Tax Reform 2019

Gambling Deduction Tax Reform