Itemizing vs. Standard Deduction Under TCJA
The Tax Cuts & Jobs Act (TCJA), is the first major overhaul of our tax code since 1986. We are releasing blogs covering some of the biggest changes that impact the most people. One of these major changes is the increase in standard deduction. As you will read below, it has nearly doubled! Knowing exactly how that impacts you can help you understand why your return might look different from past years.
Itemizing vs. Standard Deduction
When filing your taxes, you can either claim the standard deduction or itemized deductions to lower your taxable income. The difference is that the standard deduction lowers your taxable income by a fixed amount and itemized deductions are composed of a list of expenses you paid that can be written off.
When preparing taxes, hb&k helps the taxpayer decide which would be more advantageous to their individual situation. When someone itemizes on their return it is because they have more expenses they can deduct than the standard deduction amount.
Choosing the Standard Deduction in 2018
Benefits of choosing the standard deduction are that you get it even if you don’t have expenses that equal the standard deduction amount. That means you don’t have to keep track of expenses through the year or hang on to receipts for those expenses.
Under TCJA, it has nearly doubled, which means many people who used to itemize will not be over the standard deduction amount. Here are the amounts:
- Married filing joint – $24,000 (it was $12,700 last year).
- Married filing joint if both are over 65 or blind – $26,600.
- For the single filer – an increase from $6,350 last year to $12,000 this year.
Choosing to Itemize in 2018
Itemized deductions are generally the route to go if you had more expenses than the standard deduction. Some things people typically itemize would be charitable donations, mortgage interest paid, and medical expenses, etc.
Many people who have itemized in the past will not benefit from doing so this year. However, Alabama law has not caught up. Taxpayers can choose to use the standard deduction on their federal tax return to match the TCJA changes, and still choose to itemize on their state tax return.
The tax law changes are here. And we’re here to help you understand them! Please contact hb&k with questions you have regarding how TCJA affects you. We offer tax consulting opportunities to ensure you take advantage of opportunities available to you.