You have probably heard that the standard deduction amount has dramatically increased for 2018. While this won’t affect your tax return until next year, it’s important to know what’s going on because it could have an impact regarding your financial planning for the coming year.
New Standard Deduction Amounts
In 2017 the standard deduction was
- $6,350 for taxpayers filing individually
- $12,700 for married taxpayers filing jointly
In 2018, those rates have nearly doubled. The new standard deduction amounts are:
- $12,000 for taxpayers filing individually
- $24,000 for married taxpayers filing jointly
These new deduction amounts could be great news for some people, but troubling news for others. It all depends on your personal financial picture and your approach to deductions.
Changes to Itemized Deductions
It makes sense that these changes to the rules about the standard deduction also come with some changes to itemized deductions as well. In 2018, some of the categories for itemized deductions will disappear or face major changes.
One of the biggest changes is the new cap to state and local tax (a.k.a. SALT) deductions. These include:
- Income tax
- Sales tax
- Real estate tax
- Property tax
In 2018, if you want to itemize any SALT deductions, the total amount you can deduct is limited to $10,000. If you live in a high-tax state, you may be hit hard by this change. That’s why it’s so important to look ahead now so you can make informed financial decisions along the way.
Defunct Itemized Deduction Categories
Other itemized deduction categories have been cut altogether starting in 2018. These include deductions for:
- Unreimbursed employee expenses
- Tax preparation fees
- Theft and personal casualty loss
If you have itemized your deductions in the past, looking over the 2018 changes now is important so you’ll know which path to prepare for—itemizing or taking the standard deduction—when it comes time to file your 2018 return. If you live in a high-tax area or if you were on the cusp of itemizing versus taking the standard deduction in the past, you should definitely look at the numbers ahead of time.
For help navigating these recent changes to the tax code, you can contact the experts at Taxation Solutions, Inc. We are here to provide information and advice to home- and business owners in Mesa and the surrounding area. Give us a call today!