The Republican tax bill has a series of tax hikes that individuals need to be aware of in 2018 and going forward.
#1: No deduction for interest on home equity line debt used for personal purposes: Most taxpayers have been able to borrow as much as $100,000 against the equity in their homes, use the money for personal purposes, and deduct the interest on their taxes.
No more. The “Tax Cuts & Jobs Act” eliminates the deductibility of interest on home equity line debt that is not used for home improvements. What’s more, this change is retroactive, applying to equity line debt taken on before 2018 as well. So if you’ve taken out a HEL or second mortgage, you now have to keep track of how much of the money was used for improvements, and deduct the interest on only that amount. So much for “tax simplification.”
#2: No deduction for local business meals and entertainment. Whether it’s lunches with clients, breakfasts with peers in your industry, business dinners with experts in your field, it doesn’t matter. All local meals are now disallowed business deductions. Just about the only exceptions are meals provided for the convenience of an employer and meals when people have to spend the night out of town while traveling on business (in both cases, 50% deductible).
Watch this space for regular additions to the list of new tax hikes and challenges.