We’ve written about this topic previously, but are still going to cover it in-depth and from a different angle to better understand the concept of the itemized deductions subject to the 2% limit, as well as the specifics of how to it applies to your fees for tax preparation.
Maddie writes in: “Hi Mike, I have a question for you. My tax preparer has always raised her fee pretty substantially every year when I go to her and she always jokingly justified it by saying ‘well, at least it’s deductible.’
Is that even true and does it do anything good for me or is it really just helping her? Thanks!”
Thanks, Maddie. For starters, in years past, yes, your preparer has always been honest with you. It is a deduction against your other income on Schedule A of Form 1040.
This year (2019), however, if she tries to pull the same thing, she will not be being as honest.
The Tax Cuts and Jobs Act took away your ability to deduct any of the previous items that were subject to the 2% of AGI floor.
Unfortunately for those paying high fees (and those charging them), there is now less incentive to have someone else prepare your income taxes for a fee.
You may be wondering: “Well, my preparer tells me I have a lot of deductions every year. Which other ones are no longer deducible?”
There is a laundry list of now-non-deductible personal expenses for Schedule A.
We will only provide a small list; tax preparation fees, union dues, investment adviser fees, appraisal fees, and hobby expenses. For a longer list, click here.
The details may change in the coming years as this provision was only meant to last until 2025, at which point the old rules will apply again if the new ones are not extended.
In addition, the deductions likely to be your largest ones are still deductible, including mortgage interest and property taxes.
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This article should not be considered tax or legal advice. Always consult a professional first.