Randall S. van Reken, EA, CFP, ATP
Tax Man LLC
Tax Changes 2018
To Itemize or Not To Itemize?
That is the Question
So far the previous episodes of these tax updates, there really weren't any action items for either you or me. It's been information and clarifications of things that impact you, but not what you can or will do differently. This one is a bit different in that it may change how you get ready for tax time and how much work is really needed for your 2018 return (less than you think I bet). It’s good news because it will be much simpler and faster for many of you.
Free is Good!
Everyone is given a "free" deduction, just because they’re breathing, called a standard deduction. This amount in 2017 was $6,300 for single folks, $12,600 for married filing jointly and $9,350 if you were head of household (single with kids normally). In order to deduct more than that, you have to tally up your "itemized" deductions starting from zero. If you can't beat the freebie, you take the freebie.
How Do You Know If You Itemized in 2017?
Itemized deductions reported on Schedule A. If you're not sure if you itemized on your return last year check your copy. If you filed a 1040EZ, a 1040A or filed a 1040 without a Schedule A, then you did not itemize. Unless things have changed for you (bought a home, high medical costs, lots of charity, filing single instead of married), you likely will not itemize in 2018 since you didn't in 2017.
So What are Itemized Deductions and What Changed?
These are things like mortgage interest, property taxes, sales tax, DMV, medical expenses and charity. A few deductions were eliminated and a few others were limited, but more on that in the next episode.
But what really changed was that they nearly doubled the freebie!! Single folks now get $12,000, Married filing jointly goes to $24,000, and Head of Household gets $18,000. If you're over 65, you get a little bit more on top of that. If you didn't itemize in 2017, something will have to dramatically change (the mortgage, charity, medical, change in filing status) to be able to itemize in 2018. That's where your job, and mine, might get a lot easier this year. I've reviewed my client statistics and for all of them who itemized deductions in 2017, more than half of them will NOT for 2018. That’s not a bad thing.
Remember how “free” was good. Simple is good too.
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