It’s that time of year again: tax season. Taxes are due on April 15, and the weeks leading up to that due date filled with days of stress. We want to make sure that you are as prepared as possible this tax season. This is especially true as changes caused by government tax reform take effect.
One section of your tax filing that’s change is your tax deduction.
Tax deductions are not new. They have always been a way for people to save on their annual taxes or increase the likelihood of receiving a return. However, the many little changes made to the deduction process may change the way you file your deduction.
The standard deduction is a flat-rate reduction to your adjusted gross income. If you think your itemized deduction will be less than the standard, taking the standard deduction is a wiser and faster choice.
The standard tax deduction for individuals and households goes up each year, depending on inflation. Deductions for individuals for the 2019 tax year have gone up from $12,000 to $12,200, and household deductions have risen from $24,000 to $24,400. While this shift can seem small, it can make a difference in deciding whether you should itemize your deduction or take the standard.
An itemized deduction is the total amount of expenses allowed by the IRS to decrease your taxable income. It will enable you to pick and choose what you deduct. If your itemized deductions equal more than the standard, it is smarter to go the itemized route even if it will take a longer time to submit.
Some things you itemized in the past may no longer qualify. For example, expenses such as moving costs due to work, job search expenses, tax preparation fees, employee business expenses, employee business expenses, and alimony deductions can no longer be written-off for tax purposes. There is also now a cap on how much you can itemize for state and local real estate taxes, personal property taxes, and income taxes.
While choosing between a standard and itemized deduction may seem like a simple decision, it’s essential to consider everything to ensure you make the most out of your tax return.
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