As 2017 drew to a close, a new tax bill was signed into law. Two major aspects of this bill are a large increase in the standard deduction and significant adjustments to how itemized deductions will work moving forward.
How Big Is the Standard Deduction Increase?
The standard deduction is a pre-arranged amount that filers can deduct from their taxable income. Every taxpayer has the option to take the standard deduction.
In 2017 the standard deduction was roughly $6,500 for single filers and $13,000 for joint filers. In 2018 those numbers have jumped to $12,000 for single filers and $24,000 for joint filers. This dramatic increase will make taking the standard deduction much more attractive to many taxpayers!
What Happened to Itemized Deductions?
If you don’t take the standard deduction, your other option is to itemize your deductions. Itemizing requires more documentation, paperwork, and record-keeping throughout the year. However, for some taxpayers, itemizing can save them more money.
However, recent changes to the tax code may prompt many filers to opt for the standard deduction, instead. Since the standard deduction increased by so much, it may make better financial sense to go that route.
Aside from the higher standard deduction, some taxpayers may decide not to itemize anymore because many categories in the itemized deduction camp have either been eliminated or changed as of 2018. For example, you can no longer claim the following as itemized deductions:
- Most casualty and theft losses (except those attributable to a federally declared disaster)
- Expenses related to moving
- Tax preparation expenses
- Employer-subsidized parking and transportation reimbursements
- Unreimbursed employee expenses
With these categories now defunct, itemizing may no longer make financial sense to filers who chose to itemize in the past.
If you’re not sure whether you should itemize or take the standard deduction in the wake of these tax shifts, call the team at Taxation Solutions, Inc. We are here to help taxpayers in Arlington and the surrounding area navigate the tax code and make informed decisions regarding their filing choices. Call us today to set up an appointment!