A huge change that was a result of the 2018 tax bill was that the personal exemption was eliminated. That doesn’t mean you have to panic. There was a sharp increase to the standard deduction – nearly doubling the standard deduction from 2017.
What is the standard deduction?
- The IRS allows you to take the standard deduction regardless of you having other qualifying deductions/ tax credits. This deduction reduces the amount of income you pay taxes on.
- Itemized deductions are expenses that the IRS allows you to deduct to decrease your taxable income. If you file any itemized deductions you cannot take the standard deduction.
- There are many popular tax deductions that filers can take, such as home mortgage interest, medical expenses, charitable donations, etc. Filing such tax deductions would mean you cannot take the standard deduction.
In 2018, the standard deduction is $12,000 for single filers and married couples filing separately, $24,000 for married couples filing jointly, and $18,000 for the head of the household.
The standard deduction is $1,300 higher if you are over the age of 65 or blind. It is $1,600 higher if unmarried and not a surviving spouse. If you claim someone as your dependent, the standard deduction may be smaller.
The number of filers who itemize is projected to fall from 46.5 million in 2017 to 18 million in 2018. Although it may be easier for you to file the standard deduction, it may also be in your best interest to itemize – it could end up saving you more money.
