12/21/2023 0 Comments Itemized vs standard calculator![]() If the standard deduction that you qualify for is greater than the sum of your itemized deductions, you should take the standard deduction. Whether you should itemize your deductions or take the standard deduction largely boils down to which deduction is bigger. So Should I Take the Standard Deduction or Itemize? The Tax Cuts and Jobs Act of 2017 changed the floor for this deduction to 7.5 percent of the taxpayer’s adjusted gross income, the level it was at prior to the ACA. Since the passage of the Affordable Care Act (ACA), taxpayers were only able to take medical expenses as an itemized deduction if they equaled more than 10 percent of the taxpayer’s adjusted gross income. Lastly, a slight change has been made to the medical expense deduction. Lastly, the amount that can be deducted for taxes paid to local or state governments is now capped at $10,000 per return, with married taxpayers filing separately limited to $5,000. Home equity loan interest also can no longer be deducted, and only those in disaster areas will be able to claim theft or casualty losses. “Miscellaneous itemized expenses”–which included tax preparation fees, unreimbursed employee expenses, and investment management fees–can no longer be deducted. Second, a couple of categories of expenses that were previously able to be claimed as itemized deductions have been eliminated. The blind or aged can claim an additional $1,300 if filing as married or $1,600 if filing as unmarried. For the 2018 tax year–that is, for taxes filed for 2019–the standard deduction is $12,000 for individuals and spouses filing separately, $18,000 for those filing as head of household and $24,000 for spouses filing together and surviving spouses. The amount of the standard deduction usually changes every year. When two spouses are filing separately and one spouse uses itemized deductions, the other spouse cannot take the standard deduction they must itemize as well. Nonresident aliens don’t qualify for the standard deduction. Almost everyone who does not itemize deductions qualifies to take the standard deduction. The standard deduction is a set amount determined by the law that a qualified taxpayer can deduct–or subtract–from their overall taxable income. 27, 2022.The Basics of How the Standard Deduction Worksīefore we look at the recent changes to the tax code and why a taxpayer may choose to take the standard deduction vs itemized deduction, let’s look at the basic mechanics of each. “ 2021 Instructions for Schedule A.” Accessed Jan. “ Interest on Home Equity Loans Often Still Deductible Under New Law.” Accessed Jan. “ With New SALT Limit, IRS Explains Tax Treatment of State and Local Tax Refunds.” Accessed Jan. “ Publication 5307: Tax Reform Basics for Individuals and Families,” Pages 6–10. 502 Medical and Dental Expenses.” Accessed Jan. “ Expanded Tax Benefits Help Individuals and Businesses Give to Charity During 2021 Deductions Up to $600 Available for Cash Donations by Non-itemizers.” Accessed Jan. “ Charitable Contribution Deductions.” Accessed Jan. “ Publication 936, Home Mortgage Interest Deduction.” Accessed Jan. “ Credits and Deductions for Individuals.” Accessed Jan. “ IRS Provides Tax Inflation Adjustments for Tax Year 2021.” Accessed Jan. “ IRS Provides Tax Inflation Adjustments for Tax Year 2022.” Accessed Jan. “ Tax Reform Brought Significant Changes to Itemized Deductions.” Accessed Jan. “ About Schedule A (Form 1040), Itemized Deductions.” Accessed Jan.
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