Ask the Advisor – Understanding Standard and Itemized Tax Deductions
Q. I heard that under tax reform there were changes to the standard deductions and itemized deductions. Can you tell me more about that?
For many taxpayers the changes to standard deduction is great news! The amount increased to $24,000 for married filing jointly; $18,000 for head of household and $12,000 for all other taxpayers. Additional deductions are available for taxpayers over the age of 65. With this increase in the standard deduction, many taxpayers will no longer itemize deductions causing a simplification in the preparation of their income tax returns.
For taxpayers who do itemize, the income-based, phase-out of certain itemized deductions no longer applies. This allows for a greater allowable itemized deduction for many higher income taxpayers. Perhaps the most controversial change for itemized deductions relates to state and local income, sales and property taxes, which are now limited to a combined, total deduction of $10,000, or $5,000, if married filing separately. Anything above this amount is not deductible. Additionally, taxpayers can no longer deduct miscellaneous itemized deductions. Previously, items like union dues, tax preparation fees and investment expenses which exceeded 2% of their adjusted gross income were allowable itemized deductions.