Under the new tax law, with the combination of higher standard deductions and paring back of itemized deductions there will be far fewer filers itemizing in 2018 compared to prior years. The new standard deductions are $24,000 for married couples filing a joint return, $12,000 for single filers and $18,000 for heads of households. Further, people age 65 or older, and filers who are blind, get an additional $1,300 per person and $1,600 if unmarried. Taxpayers will only file a Schedule A if total itemized deductions exceed the standard deduction. The most common itemized deductions under the new tax reform are as follows:
- Medical Expenses Deduction – taxpayers can claim a deduction for the portion of medical expenses that exceed 7.5 percent of adjusted gross income for 2018. (Note in 2019 this increases to 10 percent)
- State and Local Taxes Deduction (SALT) – taxpayers can claim a deduction for state and local taxes up to the cap of $10,000. The SALT deduction covers a wide range of taxes including: property, sales, and income taxes.
- Home Mortgage Interest – taxpayers can claim a deduction for home mortgage interest paid to financial institute for mortgages up to $750,000, or $375,000 for married taxpayers filing separately.
- Charitable Donations – taxpayers can claim a deduction for cash and non-cash donations to qualifying charitable organizations.
Let MMKR know if you have any questions regarding the new tax law. One of our certified public accountants will be happy to work with you. Contact us through our website or give us a call at (952) 545-0424.