Are you losing all your deductions? Heck, no. The sky didn’t fall after all.
More Work than They Bargained For (Isaac H. Evans), Carol L. Douglas, courtesy Camden Falls Gallery
This time around, I read daily reports of how this bill would eliminate the home-office deduction or other important considerations for the self-employed. Many of my artist friends were very troubled. It has done none of those things.
I’m not a tax preparer. For heaven’s sake, don’t rely on this for tax planning. However, I’m keenly interested, because I prepare my own taxes. Anything that would simplify that would make me very happy.
Spring at Rockport, Carol L. Douglas
For many of my friends and family, the biggest change—and one that could cost them dearly—is the cap on state and local tax deductions at $10,000. People in other states used to boggle when I told them I paid $12,000 a year in property taxes in my middle-class neighborhood in New York. It’s one of the reasons I moved. (We still pay income tax to New York, for reasons that are too complicated to go into here.) For artists in New York, New Jersey and California who own their own homes, this cap could hurt.
This will be offset to some degree by changes in the standard deduction and the income tax rate. I sat with a New York artist friend last week totting up her plusses and minuses on my fingers. I think she will be better off even with the property tax cap.
Coast Guard Inspection (American Eagle), Carol L. Douglas, courtesy Camden Falls Gallery
In most cases those households with five-figure property taxes will also see reductions in their tax rate. May they use their savings to buy more paintings.
There are some other changes that might affect artists. One is the threshold for medical expenses, which temporarily drops back to 7.5%. There have been years where that would have mattered to me, and it’s a pity that it couldn’t have been cut permanently. It’s important to low-income people with catastrophic illnesses, especially in this era of high deductibles. My friend Barb will be happy that it’s retroactive to 2017, as she had to have emergency surgery this year.
Winch (American Eagle), Carol L. Douglas, courtesy Camden Falls Gallery
Casualty loss deductions are now limited to federal disaster areas. If a Nor’easter drops a spruce on your roof and your insurance doesn’t cover it, you’re out of luck. There are some other miscellaneous expenses you won’t be able to deduct, like unreimbursed job expenses or moving expenses.
But as for Schedule C filers—which most of us artists are—the new tax bill appears to have helped, not hurt us. It provides an across-the-board 20% reduction of our business income before it gets transferred to our Schedule A. (The rest of its provisions appear aimed at higher fliers than me.)
As far as I can see, the sky didn’t fall after all. But if you’re reading this differently from me, let me know in the comments.