It can be complicated to do your taxes, and so any chance you can get to keep things simple is usually much appreciated. The standard deduction is one instance in which the IRS gives you a break, and in the past, about 7 in 10 taxpayers every year have taken advantage of the standard deduction to save time and effort in figuring out what all their itemized deductions would be.
Tax reform made dramatic changes to the standard deduction, boosting its size considerably. At the same time, by limiting some of the things that taxpayers can itemize, the new tax rules made it likely that an even larger percentage of returns in 2018 will include the standard deduction. Let's look more closely at what the amounts for the standard deduction in 2018 will be and why you'll probably use it when you file next year.
Continue Reading Below
How much the standard deduction amounts for 2018 went up
During most years, standard deductions go up by small amounts to reflect inflation. But thanks to tax reform, the increases in the standard deduction for 2018 were really big.
In addition, some taxpayers get even larger standard deductions. If you're 65 or older, then you can add $1,600 to your standard deduction if you're single or $1,300 if you're married. Those who are blind get the same boost to their standard deduction.
However, there are some taxpayers who aren't allowed to claim the full standard deduction amount. If you are someone else's dependent for tax purposes, then a lower standard deduction of $1,050 applies. Those dependents who have earned income can qualify for a higher standard deduction that's equal to their total earned income plus $350, up to the normal standard deduction amount for the dependent.
Why a lot more people will take the standard deduction
It's pretty easy to understand why more taxpayers are likely to take the standard deduction in 2018 than in previous years. With such huge increases to the standard deduction amount, it'll take a lot more itemized deductions in order to make it worth it to go to the extra trouble of itemizing. For instance, many single taxpayers who were able to come up with $8,000, $9,000, or $10,000 in itemized deductions won't be able to get above the new $12,000 amount. Old strategies in which you could double up on deductions to get over the lower standard deduction amount will likely no longer work for most taxpayers.
In addition, the new tax laws also put some limitations on itemized deductions that didn't exist previously. The most important new limit is on state and local taxes, for which you'll no longer be able to claim more than $10,000 as an itemized deduction. For many higher-income taxpayers, the state and local tax deduction was an essential part of what made it worth it to itemize.
That doesn't mean that you shouldn't take the trouble to see if you'd do better by itemizing. If the math works to your advantage, then taking the time to prepare Schedule A and itemize your deductions should result in tax savings. Don't be surprised, though, if you discover that even though you've itemized your deductions in past years, it no longer makes sense to do so in light of the larger standard deduction amounts for 2018 and beyond.
The $16,122 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.