NEW YEAR RETURNS WILL BE MATERIALLY AFFECTED BY THE NEW TAX LAW. EARLY QUESTIONS TO CONSIDER
BY WALTER DASZKOWSKI
The Tax Cuts and Jobs Act of 2017 (TCJA), broadly, lowered income tax rates for individuals and for businesses starting with the 2018 tax year. One of its biggest changes is to the standard deduction, which has substantially increased, while many deductions have been trimmed or eliminated.
Under new (as well as prior) law, taxpayers can either take a standard deduction or itemize deductions on Schedule A of IRS Form 1040. The standard deduction is generally a fixed dollar amount, adjusted each year for inflation. The value of the deduction depends mostly on the taxpayer’s filing status. Typically, tax preparation involves comparing the total of itemized deductions with the standard deduction, then choosing the larger amount. Prior to TCJA, standard deductions for tax year 2018 were slated to be:
• $13,000 Married Filing Jointly or Surviving Spouse
• $9,550 Head of Household
• $6,500 Married Filing Separately or Single Filer For years 2018 to 2025, new standard deductions will be:
• $24,000 for Married Filing Jointly or Surviving Spouse
• $18,000 for Head of Household
• $12,000 for Married Filing Separately or Single Filer
Another reason for increased focus on the standard deduction is the newly reduced number (or value) of itemized deductions. State and local tax deductions now are capped at $10,000 ($5,000 for married individuals filing separately). Miscellaneous itemized deductions, such as unreimbursed employee business expenses, investment advisory fees, and estate planning fees can no longer be deducted. The mortgage interest deduction is now limited to $750,000 of total debt, effective for new mortgages in 2018.
Medical and dental expenses, meanwhile, can now be deducted for expenses that exceed 7.5% of a taxpayer’s adjusted gross income (it was 10% in prior years). The percentage limit for charitable cash donations by an individual taxpayer to public charities and certain other organizations increased from 50% to 60%. If you are unsure how changes will affect you, seek the advice of a tax professional.
Walter Daszkowski, CPA, PFS
Daszkowski, Tompkins, Weg & Carbonella
CPA, P.C. 1303 Clove Road, Staten Island
T: 718.981.9600 Option 1 /
F: 718.981.9601 278 Route 34,
Suite 1 & 2, Matawan, NJ wdcpa.com