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Changes Under the TCJA: To Itemize or Not to Itemize?

December 02, 2019

Changes under the TCJA have many taxpayers wondering whether they should continue to itemize deductions for 2019. The answer depends on a few things..Read on

*Editor’s Note- This blog was originally posted November 8, 2018 but has been updated as of December 2, 2019 for accuracy and comprehensiveness.

Traditionally, many individuals have itemized deductions on their federal income tax returns, rather than taking the standard deduction. However, the Tax Cuts and Jobs Act (TCJA) temporarily increases the standard deduction and changes the rules for itemized deductions.

In light of these changes, should you continue to itemize deductions on your 2019 filing? 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

Under prior law, for 2017, the basic standard deduction was:

  • $6,350 for single filers and married filing separately,
  • $9,350 for heads of household, and
  • $12,700 for joint filers and qualifying widow(er)s.

Additional deductions were allowed for elderly and blind taxpayers.

Under the TCJA, the basic standard deduction has been substantially increased for 2018 through 2025. The standard deduction for 2019 has increased to:

  • $12,200 for single filers and married filing separately,
  • $18,350 for heads of household, and
  • $24,400 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 annually for combined state and local 1) property taxes and 2) income taxes (or sales taxes if that option is chosen).

Medical expenses. Although for 2017 and 2018 the threshold amount for itemized medical expense deductions was lowered to 7.5% of adjusted gross income (AGI), for 2019, the threshold returns to 10% (amount prior to TCJA)

Charitable donations. For 2018 through 2025, the TCJA increases income-based limits for charitable contributions 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 2019.

The TCJA…So Many Changes, So Many Questions…we can help you navigate this huge tax overhaul! Visit our Tax Reform Center for everything you and your business need to know, now.

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