*Editor’s Note- This blog has been updated as of October 31, 2022 for accuracy and comprehensiveness.

Traditionally, many individuals have itemized deductions on their federal income tax returns, rather than taking the standard deduction. However, December 2017’s Tax Cuts and Jobs Act (TCJA) temporarily increased the standard deduction and changes the rules for itemized deductions. So what’s new in 2022? Anything you should do before year end? We explore here.

Should I itemize?

The answer depends on whether the standard deduction for your filing status exceeds the allowable itemized expenses you’ve paid during the year.

Recent changes are expected to cause more taxpayers to take the simpler standard deduction or to “bunch” expenses and then itemize deductions only every other year. Here’s some important information to help evaluate what’s right for your circumstances.

Increased Standard Deduction

Due to a change under the TCJA, the basic standard deduction has been substantially increased for 2018 through 2025. The standard deduction for 2022 is:

• $12,950 for single filers and married filing separately,

• $19,400 for heads of household, and

• $25,900 for joint filers and qualifying widow(er)s.

These amounts will be indexed for inflation through 2025. The additional standard deduction for the elderly and the blind is unchanged. A key trade-off for increasing the standard deduction under the TCJA is that personal and dependency exemptions have been suspended through 2025.

Changes to Key Itemized Deductions

The TCJA also contains provisions that affect itemized deductions, including:

Home mortgage interest. For 2018 through 2025, the TCJA limits this deduction to interest paid on the first $750,000 of home acquisition debt, down from $1 million, generally starting with loans taken out after December 15, 2017. Preexisting home acquisition debts aren’t affected by this provision, however.

State and local taxes. For 2018 through 2025, the TCJA limits the deduction to $10,000 ($5,000 if married filing separately) annually for combined state and local 1) property taxes and 2) income taxes (or sales taxes if that option is chosen).

Medical expenses. The threshold amount for itemized medical expense deductions is 7.5% of adjusted gross income (AGI).

Charitable donations. For 2018 through 2025, the TCJA increases income-based limits for cash charitable contributions to public charities from 50% to 60% of AGI. It also eliminates deductions for contributions paid to colleges in exchange for athletic event tickets.

Miscellaneous itemized deductions. For 2018 through 2025, the TCJA suspends itemized deductions for such items as tax preparation costs, investment expenses and unreimbursed employee business expenses. Under prior law, these deductions were subject to a 2%-of-AGI floor.

Casualty and theft losses. For 2018 through 2025, the TCJA allows personal casualty and theft loss deductions only to the extent they’re attributable to a federally declared disaster.

The TCJA also temporarily suspends the overall limitation on itemized deductions for certain high-income taxpayers.

Need Help?

Our tax professionals can help evaluate whether it’s advantageous for you to itemize expenses on Schedule A, as well as discuss other tax planning opportunities under the new law. Contact us before year end to schedule a tax planning meeting for 2022.

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