After much speculation and anticipation, the “Tax Cuts and Jobs Act” was passed into law on December 22nd, 2017. This law will affect your 2018 return, which will be filed in 2019.
The standard deduction amounts have dramatically increased from prior tax law. Below are the 2018 standard deduction increases:
For Married Filing Jointly, the standard deduction increased from $13,000 to $24,000
For Single, the standard deduction increased from $6,500 to $12,000
For Head of Household, the standard deduction increased from $9,550 to $18,000
No need to worry, taxpayers can still itemize their deductions. However, some taxpayers who have itemized in the past may no longer be able to do so.
The law limits the itemized deduction for state and local taxes paid to $10,000, reduced the mortgage interest deduction from $1,000,000 worth of debt to $750,000, and eliminates all miscellaneous itemized deductions (employee business expenses, tax preparation fees, etc). It also eliminates the phaseout of itemized deductions for higher income taxpayers.
These changes are only applicable to itemized deductions, not to business owners or farmers who use these items as a business expense.
Our articles are not intended to be tax advice. To seek tax advice regarding your specific tax situation, it is best practice to consult with a Certified Public Accountant.