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How elections, policy and other developments in Washington could affect the markets and your financial life
March 25, 2019

What's deductible? IRS clears up confusion around the tax law

The opinions are those of the author(s) and subject to change.
If you have questions about how the 2017 "Tax Cuts and Jobs Act" could affect your returns for 2018 and beyond, you're not alone. For months, the Internal Revenue Service has been working to clear up "a lot of holes and unanswered questions," says noted tax expert and CNBC contributor Andrew H. Friedman, principal and founder of The Washington Update. Some of the IRS's clarifications may help taxpayers maintain deductions they had feared were lost under the new law, Friedman notes in his latest report, "Tax Reform Aftermath: New Guidance for Investors."
Some of the IRS's clarifications may help taxpayers maintain deductions they had feared were lost under the new law.
For example, at first glance the law seemed to have eliminated the ability of homeowners who itemize their returns to deduct any interest on home equity loans and lines of credit (HELOCs). According to the IRS, you can still claim a deduction if the loan is specifically for home improvement. "If you build a new wing or renovate your kitchen, and you tap into your line of credit, the interest is deductible," Friedman notes. Likewise, many business owners had feared that the law's elimination of deductions for entertainment expenses would include meals. The IRS delivered the good news that meals are still deductible (at the traditional 50%) so long as the expense doesn't include entertainment.
Even with the new clarity from the IRS, many aspects of the law may be confusing, Friedman cautions. Be sure to consult your tax specialist before making any decisions.
For more insights, check out "Tax Law Update: New Information on What's Deductible — and What's Not." And for a more detailed look at the latest IRS rulings, read Andrew H. Friedman's report, "Tax Reform Aftermath: New Guidance for Investors."
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The opinions are as of 03/25/2019 and those of the author and subject to change.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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