You’ve probably heard about some of the big changes to the tax code enacted last year, especially the increase in the standard deduction. But, did you take the time to assess what impact that change will have on you?
Standard Deduction Increase
The standard deduction is the predetermined amount that you can deduct from your tax liability. You have to make at least the same amount as the standard deduction in order to take the standard deduction.
When you filed your taxes in 2017, the standard deduction was:
- $6,350 for single taxpayers
- $12,700 for married taxpayers filing jointly (or surviving spouse)
- $6,350 for married taxpayers filing separately
- $9,350 for head of household
For the tax year 2018, those amounts have increased to:
- $12,000 for single taxpayers
- $24,000 for married taxpayers filing jointly (or surviving spouse)
- $12,000 for married taxpayers filing seprately
- $18,000 for head of household
Itemized Deduction Decrease
This increase in the standard deduction didn’t come out of nowhere. There are corresponding changes to other areas of the tax code that allow for this larger standard deduction. Itemized deductions are one big area of change.
Numerous itemized deductions are affected in tax year 2018. Casualty and theft losses are no longer deductible unless they occur in a federal disaster area. State and local taxes (including property taxes) are capped at $10,000, which could negatively impact taxpayers in states where taxes and property values are high. Some miscellaneous itemized deductions are eliminated altogether, including:
- Tax preparation costs
- Investment fees
- Unreimbursed job expenses
- Moving fees
What Do These Deduction Changes Mean?
It’s important to be aware of all these changes so that you can make informed life and financial decisions throughout the year. If you itemized your deductions in the past, you may want to reassess your situation and make sure that still makes sense for you. This could save you time and expense during the year, and could make tax time much easier because you planned ahead.
If you need help interpreting these tax code changes and figuring out how they impact you, reach out to the team at Taxation Solutions, Inc. We provide comprehensive tax planning, preparation, and advising for clients in Charlotte, and we’ll be happy to help you navigate all the new deduction rules. Give us a call today!