It’s time for the annual federal tax question: to itemize or not to itemize. If you’ve been an itemizer, the IRS probably won’t be surprised if you change lanes when filing your 2018 federal tax return.
The reason: the 2018 standard deduction, which is a dollar amount that reduces your total taxable income, has nearly doubled.
How big of a deal is this tax change?
We’re paraphrasing here, but the IRS points out in “Tax Reform Basics for Individuals and Families” that it doesn’t expect to see as many itemized deductions for the 2018 tax year. In the broadest of explanations, itemized deductions “pay off” when it reduces your taxable income more than that standard deduction.
The change in the standard deduction is due to the Tax Cuts and Jobs Act of 2017, which eliminated some deductions and increased others.
This side by side shows how the deduction has changed (note: it will be higher if you or your spouse is over that age of 65 or blind)
The information we’ve got here is here as a sort of alert that yes, filing your taxes is probably going to be a different experience this year. You’ll still need to figure out if it’s more advantageous to itemize or go with the standard deduction.
Consult a tax professional on the best way to file your taxes. For more information on the tax reforms introduced this year, visit www.irs.gov/tax-reform.
This article is for informational purposes only and is not a substitute for individualized professional tax advice. Individuals should consult their own tax advisor for matters specific to their own taxes. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.