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February 06, 2019

The IRS expects a significant increase in the number of taxpayers using the new Standard Deduction for tax year 2018. The new Standard Deduction increases to $12,000 for Single Filers and $24,000 for Married Filers, which is nearly double the amount from the prior year 2017.In addition, the Standard Deduction is increased by $1,300 for each taxpayer over age 65. Therefore, married couples who are both over age 65 and file jointly will have a Standard Deduction of $26,600.

The Itemized Deduction for state and local taxes has also been limited to $10,000 for 2018. Therefore, even when a taxpayer pays substantially more than $10,000 in state income tax or sale taxes, property taxes, and other miscellaneous taxes and fees the amount of the deduction will be limited to just $10,000. This will reduce many taxpayers’ itemized deductions.

As a result, the number of taxpayers who will use the new Standard Deduction may not receive a Federal benefit from deducting their mortgage interest, property taxes, or even their charitable contributions.

While the new Standard Deduction may simplify the Federal tax filing, there are many states that did not conform to the changes in the Federal tax law. Therefore, many taxpayers will still benefit from gathering all of their Itemized Deductions to file with their State income tax return.  For example, California residents will receive Standard Deduction of just $4,401 for single filers and $8,802 for married couples filing jointly. So the threshold that must be exceeded to make itemizing a more attractive option is much lower for the state than for federal tax purposes.