Well, it’s here again…tax time…this being the first full year to “pay up”; having enjoyed a tax break on earnings all year long. Speaking for myself, this is more like a “slam dunk”. No more will I have to save receipts for Doctor’s visits, or charitable giving. The new standard deduction for “married filing jointly” is now hard to beat using the itemized deduction, which was my previous “ go to”. The biggest reason for this is the limit on SALT deductions (state and local taxes), being only $10,000.
Those Married filing jointly enjoy a standard deduction of $24,000, a Head of Household $18,000, and Singles, $12,000. Seems to me that many more taxpayers will find Tax Relief, if nothing else, in filing a simple short form.
As a comparison, in 2017, a married couple filing jointly could claim 2 exemptions ($4050 ea.), and a standard deduction of $12,700 for a total of $20,800. To itemize, they would have to beat that standard amount to make it preferable to itemize, and many of us did so, but; with exemptions having gone away altogether, this couple would need to have more than $24,000 in deductions alone to make itemizing worthwhile. With property tax and state income tax deductions limited to $10,000 (SALT), they would need $14,000 worth of mortgage interest paid, charitable giving, excess medical, and misc. deductions to make itemizing worthwhile.
And… low and behold…. just today the news is very telling. Seems that early filers are “hoppin mad” discovering that their “refund” isn’t what they were expecting. Most are lower than past years. Many of these filers fail to remember the “surprise” pay raise they received in early 2018 as a result of automatic withholding rate changes reflecting the new Tax rates. How does anyone who received one of these ”raises” expect, the same as “ last year” refund having received much of it up front, in their paycheck? Those with a sad story are those who relied on Schedule A (itemized deductions) and are now subject to SALT limits. Many are working couples living in areas with high state income taxes and high property taxes; these folks will hurt the most.
So, will anyone benefit by using the itemized deductions? One group comes to mind; singles with home mortgages. Someone here could easily beat the standard deduction by claiming a full SALT deduction, add in Mortgage interest paid, (Ex. $10,000+$5,000) not to mention other Schedule A deductions surpassing that $12,000 standard deduction handily…Answer: You Betcha…. And good for them!!
In addition, keep in mind, anyone with dependent children; married, singles, doesn’t matter; each child comes with a $2,000 Credit each, yeah, not an exemption, a credit right off your final tax bill and good for you too!! (Sorry to those of you who’ll lose that 17 year old this year) … but still!
Lastly, Congress was kind enough to keep in place an additional deduction of $1,300 each for those of us … Seniors … 65 and up…so good for me too !!!
Always: Cents Maker