At the end of 2017, tax laws changed considerably. Since these changes went into effect for 2018, now is the time to review them. One of the biggest changes to keep in mind when preparing your 2018 taxes has to do with deductions. Here is what you should know about standard versus itemized deductions and how tax reform could affect this year’s return. 

Taking the Standard Deduction 

The standard deduction is essentially a flat rate that you may deduct from your adjusted gross income. Taking this route waives your right to deduct individual expenses. This can save a considerable amount of hassle, and if you don’t have a lot of deductible expenses, it will make the most financial sense.

For 2018, the allowable standard deduction almost doubled under the new tax laws, which means far more people are likely to take it this year. In 2017, the rate was $6,350 for singles and $12,700 for those who were married and filed jointly. In 2018, the standard deduction is $12,000 for singles and $24,000 for those who are married and filing jointly. 

Itemizing Deductions 

When you itemize deductions, you waive the right to take the standard deduction; however, you get to deduct all allowable expenses. If your total expenses for the year exceed the standard amount that applies to your situation, itemizing will reduce your tax burden. Up until last year, this was the case for many individuals.

Since the standard rate increased so much, though, fewer people are likely to itemize this year; however, it is still worth reviewing your total expenses because they may exceed the standard deduction. After all, the IRS has hundreds of allowable deductions, including charitable donations, home mortgage interest, business expenses, and even tax preparation fees. 

If you’re not sure whether to take the standard deduction or to itemize when preparing your taxes, turn to the knowledgeable accounting team at Simplified Tax. Located in Sparta, WI, this firm has been providing comprehensive tax preparation services to clients throughout Monroe County for more than four decades. A locally owned and operated agency, they are proud to build lasting relationships with those they serve. To reach out and request an appointment to discuss your taxes, fill out the form on their website or call (608) 269-2633.