The 2017 Tax Cuts and Jobs Act (TCJA) was big news about a year ago, but the changes it detailed will mostly come into play in 2019 when Americans file their 2018 tax returns. One of the biggest shifts has to do with deductions. Make sure you know what you’re in for come filing season with this breakdown of TCJA deduction changes.
The overall framework of allowing taxpayers to take the standard deduction or itemizing their deductions is still the same. Additionally, most of the allowable itemized deductions still exist overall. In large part, what’s changed are the limits to various itemized deduction categories.
In some cases, such as deductions for medical expenses, taxpayers can claim more than they could previously. Under the new TCJA, taxpayers can claim a deduction for medical costs that exceed just 7.5% of their adjusted gross income. Previously your medical expenses had to reach a minimum of 10% of your AGI before you could claim a deduction.
In other cases, the amount taxpayers can claim has shrunk. Whereas you used to be able to deduct the full amount of any state or local taxes paid, you can now only deduct up to $10,000. This could be bad news for folks in areas with high property, income, or sales tax.
Increased Standard Deduction
There are numerous other changes to itemized deductions, including the elimination of many miscellaneous deductions. On the upside, though, the standard deduction has more or less doubled.
For a single filer, the standard deduction jumped from $6,350 to $12,000. For those who are married and filing jointly, the standard deduction has gone from $12,700 to $24,000.
While some of the perks of itemizing your deductions may have fallen by the wayside, taxpayers who used to itemize may still be able to claim a comparable amount using the simpler standardized deduction. Additionally, those who usually take the standard deduction may see a beneficial dip in their tax liability.
Need More Info?
If you’re not sure whether you’re better served by itemizing or taking the standard deduction under the new tax regulations, contact the team at Taxation Solutions, Inc. in Virginia Beach. We can help you understand your options and make informed decisions so that you maximize your tax savings. Call us today!