Under the 2017 tax overhaul, lawmakers significantly raised the standard deduction amount. Does it make sense to use it, or is itemizing deductions still the way to go? The answer depends on your specific situation. Below, we’ll break down some basics.
The New Standard Deduction Rates
The Tax Cuts and Jobs Act raised the standard deduction by thousands of dollars. It was a popular move, and millions of taxpayers took advantage of the new rules in 2018. According to reports, 30% of filers who’d previously opted for itemized filings switched to the standard deduction last year.
Under the new rules, single filers, or married people filing separately, can deduct $12,200 as the standard deduction. This is up from $12,000 in 2018. That number jumps to $24,000 for married couples filing jointly. In 2019, heads of households can deduct $18,350, a boost of $350 from last year. Single people and heads of households born before January 2, 1955, can add $1,650 to their standard deduction. Married couples filing jointly in the same age group can tack on another $2,600 to their standard deduction calculation.
Although the standard deduction was increased, some itemized deductions such as state and local tax deductions were decreased.
Who May Still Want to Itemize?
Homeowners may still get the best tax bang for their buck by itemizing because, under certain circumstances, they may be able to write off:
- Mortgage interest;
- Property taxes; and
- Home equity loans.
However, under the new rules, there’s a bar for how much you can write off for local real estate and property taxes. Single taxpayers in this category can only deduct $5,000; that number doubles for married couples filing jointly.
Small business owners should also consider itemizing deductions on their tax returns. Some expenses such as out of pocket health costs and health insurance are deductible as itemized deductions.
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