To Itemize or Not to Itemize?
With the passage of the Tax Cuts and Jobs Act to be in effect for tax years beginning with 2018, there are numerous changes that ma impact tax payers when filing their tax returns this tax season. One question that arises is whether it will be beneficial to itemize deductions or take the standard deduction. For a number of taxpayers, they may now find themselves taking the standard deduction as opposed to itemizing deductions as they have done in the past when considering the change in tax law.
Medical expenses are still deductible, subject to the 7.5% of adjusted gross income limitation as before. However, state and local taxes in addition to real estate taxes are now limited to $10,000 deductibility combined, whereas before these expenses were not limited. Gifts to charity remains unchanged from the year before, where you can itemize charitable contributions made throughout the tax year. Non-reimbursed job expenses and certain miscellaneous deductions such as tax prep fees, investment fees and safe deposit box charges are no longer deductible.
These changes alone could result in a taxpayer having less itemized deductions in 2018 as compared to 2017, but there is also the change in the standard deduction to take into account. The standard deduction increased from $6,350 and $12,700 to $12,000 and $24,000 for single filers and married filing joint filers, respectively.
With these changes in mind, a taxpayer who had consistently itemized deductions in the past may find themselves taking the standard deduction for the 2018 tax year.
If you have questions on the changes in itemized deductions and the standard deduction, give us a call.