Though the April 15 tax-filing deadline is rapidly approaching, many folks are still in the process of gathering their documents and getting their returns completed. In fact, there's a good chance we'll see a lot of procrastination this tax season, and while part of that can be blamed on human nature, there's also the fact that fewer filers are expected to itemize on their returns.
Each year, the majority of people who file taxes take the standard deduction rather than itemize their deductions. This year, we're likely to see an even greater uptick, since the standard deduction nearly doubled from its previous level.
For the 2018 tax year, the standard deduction for single tax filers is $12,000, up from $6,350 the previous year. For married folks filing jointly, it's $24,000, up from $12,700.
Now make no mistake about it: Claiming the standard deduction is generally a quicker, easier prospect than itemizing on a tax return. When you take the standard deduction, you don't have to comb through records and receipts and calculate various sets of numbers; you simply choose the IRS-issued deduction based on your filing status and call it a day. Therefore, if you're claiming the standard deduction, you might assume that it's perfectly fine to leave your taxes until the last minute, since going that route won't take nearly as long as itemizing. But before you land on the standard deduction, realize that there are still a number of key tax breaks at play, and if you have enough to capitalize on, itemizing will still make sense after all.
What do your expenses look like?
Rather than settle for the standard deduction and call it a day, it pays to run some numbers and see what itemizing does for you, particularly if you own a home. That's because you're still allowed to deduct interest on a home loan of up to $750,000, and if you signed your mortgage prior to December 15, 2017, you're grandfathered into the previous limit of $1 million.
Furthermore, the SALT (state and local tax) deduction is still very much in play. Effective in 2018, the most it can be worth to you is $10,000, but if you have, say, $12,000 in mortgage interest plus another $10,000 from SALT, and you're a couple filing jointly, you're already inching pretty close to the $24,000 standard deduction. Throw in enough charitable contributions, and you might actually exceed the $24,000 mark, making itemizing the better way to go.
Furthermore, keep in mind that if you spent a lot on out-of-pocket medical expenses in 2018, you might manage to claim a medical expense deduction. To do so, your total costs must exceed 7.5% of your adjusted gross income (AGI). This means that if your AGI for the year was $100,000, you can only claim medical expenses above the $7,500 threshold. But if you spent a lot last year -- say, you needed a costly procedure that your insurance plan didn't pick up -- that's one more expense to itemize.
The point here is that while you might assume that itemizing no longer makes sense for you, you won't really know until you review your records and see what expenses you racked up. Therefore, don't leave your taxes until the last minute this year, thinking you'll just take the standard deduction and make things quick. Doing so could cause you to lose out financially, and when it comes to taxes, that's the last thing you want.
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