Does Tax Reform Impact How I Claim Standard vs. Itemized Deductions?

Tax Reform, Uncategorized

On December 22, 2017 the biggest piece of tax legislation in about three decades was passed.  One of the biggest changes to the new law nearly doubles the standard deduction and eliminates or limits a number of common itemized deductions many people took in past years. Our estimate is that nearly 90% of taxpayers will now take the higher standard deduction, up from about 70% in previous years.  You may have itemized your tax deductions in the past if you are for instance a homeowner, but now you may benefit from taking the standard deduction if the new standard deduction amount for your filing status is more than your itemized tax deductions.

This means more taxpayers can feel empowered to take charge of their finances starting with doing their own taxes with TurboTax. And if they have tax questions they can get their tax questions answered with a live CPA or Enrolled Agent, with TurboTax Live.

Check out our Standard vs Itemized Tax Deduction Interactive, that in just five quick screens helps you understand the changes in the standard deduction and itemized deductions, gives you an estimate of your deductions based on inputs, tells you if may claim standard vs itemized, and makes recommendations on some end of year tax moves you can make to increase your itemized deductions.

Comments (111) Leave your comment

  1. TurboTax says I should take the federal standard deduction because it’s greater than my itemized deductions. However, for my state I can only itemize if I itemize on the federal return. But it turns out my total federal and state tax combined is actually lower if I itemize. So TurboTax is looking at the federal in isolation, when it should look at what is most beneficial in conjunction with your state filing. (I only discovered this because the state website made the recommendation.) This might only affect someone who lives in a high tax state, but it’s an important comparison that TurboTax apparently overlooked.

  2. I can take a tax credit on my AZ taxes for certain donations in AZ. Can I still deduct these donations as charitable donations on my Federal Tax Return, as long as I’m itemizing?

  3. I wanted to take the standard deduction on my Federal return and itemize my state of Kentucky return, however, I was on the phone for over an hour with TurboTax today and we were unable to figure out how to do this. All itemized deductions were entered initially and TT said I was better off taking the standard. I have already paid for the Federal & State and even had the payment to KY deducted from my checking account (even though I haven’t filed yet). I’m not able to print and review the returns until after I paid and it was at that point I discovered I would be better itemizing the state. Any suggestions on how to fix this?

    1. You can’t deduct 529 contributions from your taxes when you file. The benefit of 529s is that the increase in asset value over the life of the 529 account cannot be taxed as long as the funds are used for educational expenses. If you start contributing early in the child’s life, the benefit will be even greater.

    1. Hello Ann,
      There were a large number of Tax law changes last year that caused adjustments to refund totals this year. Also, during 2018 payroll taxes were lowered; so you may have seen more money in your paycheck throughout the year in 2018. If you still have questions or to make sure your withholdings are on track this year check out our w-4 calculator.
      https://turbotax.intuit.com/tax-tools/calculators/w4/

      Thanks

  4. Turbo tax premier 2018 will not allow me to change from standard deductions to Itemized deductions. The turbo tax website states that there is a check box to allow me to choose either and see how the deduction changes, but my screen does not have a check box. What am I missing?

  5. LINE 5a. $10,109
    LINE 5b. 4,625
    LINE 5c. 1,453
    LINE 5d. $16,187

    LINE 7 $10,000. turbo tax gave me $10,000 instead of the amount $16,187. WHY?
    LINE 10. $10,991
    LINE 14. 500
    _______
    $21,491. SINCE THE TOTAL IS LESS THAN $24,000 TURBO TAX TOLD ME TO
    USE STANDARD DEDUCTION AND NOT ITEMIZED DEDUCTION.

    WHY?

    WHEN I ADD $16,187
    $10,991
    500
    ________
    $27,678 THIS AMOUNT IS BIGGER THAN $24,000, WHY
    TURBO TAX IS GIVING ME STANDARD DEDUCTION
    INSTEAD OF ITEMIZED?

    1. Hi Antonette,
      Under the new tax law state income tax, sales tax, and property taxes are now capped at $10,000 in total so no matter how much over that you are you will only get to take $10,000 max for those deductions. Prior to the new law that was not the case you were able to take the entire total. Because your state income tax, sales tax, and property taxes were capped your itemized deductions were lower than the standard deduction which is now $24,000. I hope this helps you understand better.

      Best,
      Lisa Greene-Lewis

  6. Will Turbo Tax Deluxe let me enter student loan interest, mortgage interest, property taxes, charitable donations, etc., and then determine whether or not itemizing or taking the standard deduction (married filing jointly) is most beneficial?

  7. My niece says she claimed the standard deduction and also her contributions on the short form with your program. Is this possible?

    1. Hi Ken,
      Thank you for asking. We just checked and see the calculator is not there. We are investigating what happened. We will get it working as soon as possible so check back soon.
      Best,
      Lisa Greene-Lewis

    2. Hi Ken,
      Our Standard vs. Itemized Interactive is back up. Thank you for flagging that you weren’t able to access it this weekend.
      Best,
      Lisa Greene-Lewis

  8. Wife and I are over age 65 and retired. We are filing “married filing jointly”. Using Turbo Tax 2018 the itemized deduction amount comes substantially under the standard deduction amount. The “use itemize even though standard is higher” box is checked. I didn’t check it.. I can’t uncheck it. What likely triggered this checked box.

  9. In States such as Maryland you must itemize on the Federal in order to itemize on the State. The standard deduction in MD is $2500 so to itemize in MD is far better than taking the low standard deduction. Problem is your itemized deductions for Federal may be less than the $12,000 so you are forced to accept a reduced Federal deduction in order to have a greater State deduction. This maybe the correct way to go as the combined income tax can be less by itemizing even though a taxpayer is being forced by the State to deduct less than the Federal standard deduction in order to achieve a a larger deduction at the State level.

  10. I am a sole owner/individual of a consulting company. My itemized business deductions of past years have helped to bring my taxable amount down. How is this now handled with the new law? Do I continue to itemize even though I am just under the threshold to not itemize with my total combined income?

  11. Hi Lisa. I have had the responsibility of providing for my son-in-law for the past 3 years and have never claimed him as a dependant in my home. He receives a small ssi payment per month for his disability which makes him not able to work. He and my daughter now have a son, my grandson, who I now provide for also. Can I claim both as dependants this year 2018 and can I go back and claim my son in law for last year since I provided the majority of his living expenses last also? I have used Turbo tax for years now and did not know who to ask.

  12. My wife and I are seniors (she is 69 and I am 70) and recently moved into a Senior Living Community, we are selling our condo of 12 years. How will the Capital Gains that we will realize from the sale effect our tax return for 2018?

    1. I am divorced, my 38 year old son lives with me and is on disability , and i pay the bills in my home. Can i claim him and file head of house hold ?

    2. Hi Larry, do you anticipate the gain on sale to be more than $500,000? If not, you don’t have to worry about paying capital gains tax since you’ve lived in the home longer than two years.

  13. I made some estimates using my download version of Turbo Tax for 2018 and determined that I’ve significantly underpaid federal income tax–state as well. Any suggestions before the year is over?

    1. Hi Ed, your best bet is to firm up your projected tax liability, preferably using Tax software updated for 2018 projections, and make a 4th quarter estimated payment before 1/15/19. Of course, the sooner you make a payment to Fed and State, the better to avoid possible underpayment penalties. Reach out to me for assistance with Tax planning and projections. Thanks!

    2. Two choices that I can think of:
      – If you’re retired, take the difference out of an IRA and withhold that amount (i.e., 100%), that will catch you up
      – If you are working, then maybe update your W-2 with a fixed amount to deduct for your remaining paychecks that would make up the difference

      Also, remember that you only need to be within 10% of your actual tax, not exact (or over).

      Good Luck 🙂

    1. Hey Jim, just a heads up the article writer got it right. Employee business expenses are now disallowed for 2018-2025 under the new tax law.

  14. Lisa, I normally use Turbo Tax Premium but if I am going to now put into a standard deduction category which version should I use ( ,assuming I will not be entering any stock and bond info.

    1. I picked up the same disparity in the provided article: married seniors filing jointly have the married 2-person $24k deduction, plus $2600 for the 2 people being seniors = $26600, not the $25300 of the 3-step ‘standard deduction or itemize’ turbo tax “test”!

      Where be the turbo tax reply since the original 11/26 question was posted?

    2. I found the same apparent error in the tax program’s information (standard v. Itemized decision). Two months that have passed since you made this mistake known; it would be helpful if the author would feel obliged to respond…Lisa?

  15. What impact does the Federal Law have on my California State return as to whether itemizing or taking their standard deduction?

  16. If I am thinking of doing taxes for others, is there a version of turbotax that I can purchase to do say 50-100 tax returns for others and small businesses?

  17. I am going to contribute to a charity from a part of my required minimum distribution from an IRA. Will Turbo Tax walk me through the correct place on my tax forms to deduct this contribution from my RMD?

  18. I qualify for the standard deduction according to my inputs, but in the past, having stock trading activity required an itemized return. Has that changed?

  19. In 2017 your itemized deductions were reduced if your AGI exceeded certain thresholds. Is there a similar reduction in 2018?

  20. If the Standard deduction works for me why should I use Turbo Tax when I will not itemize? Can’t I then use the Short IRS Form?

  21. What about real estate transfer taxes, which may be a form of sales tax? Also, are moving expenses deductible? We paid for a move this year.

  22. Is it possible for a married couple to file a joint but separate return with one taking itemized deductions and the other standard? Also, when will Turbo Tax 2018 be available?

  23. Because of the age of my computer (iMac mid 2007, El Capitan Version 10.11.6), Turbotax has indicated that I will not be able to use the disc version of Turbotax 2018. Can I download the 20189 version? I use Premier. Do I have any other options?

  24. I believe that I made an error on my State taxes because I did not receive the usual $2700 on my State taxes as s refund this year.
    What do I do to correct it and receive it? Not sure where this error is located but this was the first time I did not receive it as my State tax refund.

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