Your standard deduction lowers your taxable income. Under the new tax laws, some deductions have been capped-there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. (Only the amount that is MORE than 7.5% of your AGI counts) The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you. The deductions you enter do not necessarily count “dollar for dollar ” many of them are subject to meeting tough thresholds-medical expenses, for example, must meet a threshold that is pretty hard to reach. Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund. The new higher standard deduction and the elimination of certain deductions, as well as the cap on state and local taxes have had a major impact since the new tax laws went into effect beginning with 2018 returns. Many taxpayers are surprised because their itemized deductions are not having the same effect as they did on past tax returns. Are you making the common mistake of just adding up all the amounts for your itemized deductions without considering the caps and thresholds that must be met?
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