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)
Married filing jointly(or qualifying widow/widower)
Married filing separetly
Head of household
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 advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.