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The Tax Cuts and Jobs Act of 2017 made some provisions to the tax tables and numbers used to estimate your tax liability. Included in those changes were adjustments to the standard deduction for each filing status.
Here are the answers to a few frequently asked questions about the standard deduction vs. itemized deductions in 2019.
1. How did the standard deduction change under tax reform?
With the passing of tax reform, the standard tax deduction available for each filing status significantly increased. If you file as Single or as Married Filing Separately, your standard deduction jumped from $6,350 in 2017 to $12,000 in 2018. And if you’re filing a joint return with your spouse, the standard deduction increased to $24,000, up from $12,700 at the end of 2017. Head of Household filers can claim an $18,000 standard deduction on their tax returns, which previously was $9,350.
Keep in mind, if you file as Married Filing Separately and your spouse chooses to itemize tax deductions on his or her own return, your standard deduction is $0 like in previous years.
For tax year 2019, the standard deduction amounts increased slightly.
|Married Filing Jointly
|Married Filing Separately
|Head of Household
2. Is it now better or worse for me to claim the standard vs itemized deductions?
If you’re among the many taxpayers who are concerned that not itemizing tax deductions means you’re at a disadvantage, you can relax. For many, it’s actually the opposite.
An increase in the standard deduction doesn’t mean you lose the tax benefit of the deductions you itemized in the past. You simply get the deduction without needing to show proof of the deductible expense — or even have it at all. For example, say your itemized deductions last year totaled to $24,000, and you filed a joint return with your spouse. On your 2019 tax return, you can immediately claim the $24,200 standard deduction without having to enter your itemized deductions.
In another scenario, let’s say your itemized deductions totaled to $17,000 in 2019. As long as you continue to file a joint return, you likely qualify to claim the $24,200 standard deduction. That means you actually reap more tax benefit by using the standard deduction than you would have by itemizing.
3. Can I still itemize if I have lots of deductions?
Yes! If your itemized deductions total to more than the new standard deduction, you can and should still claim your deductible expenses on your tax return. It’s important to calculate the difference to see which is higher. If you use tax filing software like TaxAct®, the program will help you determine which the better option for your situation is.
4. Were any itemized deductions eliminated?
Perhaps one of the most important changes made is this: The total deduction for state and local income taxes is now limited to $10,000 per return (Married Filing Separately returns have a $5,000 limit).
In addition, you can no longer claim “miscellaneous itemized deductions,” such as tax preparation fees, investment management fees, and unreimbursed employee expenses. In the past, you could deduct those to the extent the total miscellaneous itemized deductions exceeded 2 percent of your adjusted gross income. However, because of that floor limitation, it was difficult to qualify for those deductions anyway.
Other deductions that are no longer available include home equity loan interest and casualty or theft losses (except in disaster areas).
5. How has the medical expense deduction changed?
Under the Affordable Care Act (ACA), medical expenses were only deductible to the extent they exceeded 10 percent of your adjusted gross income for most people. Under the new tax law, the floor reverted back to 7.5 percent of adjusted gross income for 2017 and 2018, which was the floor before the ACA went into effect. Congress extended this provision for another two years (tax years 2019 and 2020) in December 2019 with the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (aka Tax Extenders Act).