Overview of the Tax Cuts and Jobs Act
Major tax reform that affects both individuals and businesses was enacted in December 2017. It’s commonly referred to as the Tax Cuts and Jobs Act, TCJA or tax reform. The IRS estimates that they we will need to create or revise more than 400 taxpayer forms, instructions and publications for the filing season starting in 2019. It’s more than double the number of forms they would create or revise in a typical year.
Some of the most basic changes are:
Changes to Standard Deduction.
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. The standard deduction reduces the income subject to tax. The Tax Cuts and Jobs Act nearly doubled standard deductions. When you take the standard deduction, you can’t itemize deductions for mortgage interest, state taxes and charitable deductions on Schedule A, Itemized Deductions.
Starting in 2018, the standard deduction for each filing status is:
Single, $12,000(up from $6,350 in 2017). Married filing jointly. Qualifying widow(er) $24,000, up from $12,700 in 2017), Married filing separately, $12,000 (up from $6,350 in 2017). Head of household. $18,000 (up from $9,350 in 2017)
The amounts are higher if you or your spouse are blind or over age 65. Most taxpayers have the choice of either taking a standard deduction or itemizing. If you qualify for the standard deduction and your standard deduction is more than your total itemized deductions, you should claim the standard deduction in most cases and don’t need to file a Schedule A, Itemized Deductions, with your tax return.
THIS MEANS THAT… Many taxpayers will no longer itemize their deductions and have a simpler time in filing their taxes. For a list of deductible items that you may be able to itemize please see our Income Tax Organizer.
More than 9 out of 10 taxpayers use tax software or a paid preparer to file their taxes. You still need to compare your itemized deductions to see which on is best for you.