Who Knew

Ah, the end of the year. Everyone feels all warm and fuzzy from giving generously over the holiday season. Now comes the time of year when the IRS wants to take what’s theirs. Make sure that you don’t give them more than their fair share! Many people wonder whether they will benefit more from the standard deduction or taking the extra time and itemizing their deductions. Let’s talk details.

Although tax reform has been passed, the new policies won’t go into effect until January 1, 2018. That means that your filing for your 2017 taxes will be the same as in years past. First, let’s talk about the standard deduction. For single filers, you can deduct $6,350 if you opt for the standard deduction. For married filing jointly, couples can deduct $12,700. Keep in mind if you and your spouse choose to file as married filing separately, you both must choose the same filing method – itemized or standard deduction. Talk to your accountant to determine which deduction route will benefit the two of you most financially. If you’re a head of household, you can claim a standard deduction of $9,350. If you’re 65 or older or are blind, that standard deduction will increase even more – $1,550 if you’re a head of household, or $1,250 if you’re married or a qualifying widow(er). Filers can look forward to the adjusted rates for tax season next year. The standard deduction will double to $12,000 for individuals, $18,000 for head of household, and $24,000 for married couples. If you’re over the age of 65, blind, or disabled, tack on another $1,300 ($1,600 if you aren’t married). Because of this massive increase in the standard deduction amount, many filers will claim the standard deduction in lieu of itemizing when filing their 2018 taxes.

We can look forward to those increased standard deductions for 2018, but let’s talk details about filing your 2017 taxes in the near future. Why claim the standard deduction? Well, there are a couple of reasons. First of all, some people (especially younger ones) don’t have expenses that would qualify as deductions for tax purposes. By opting for the standard deduction, those people can take advantage of reducing their taxable income. Secondly, some people have qualifying tax-deductible expenses, but those expenses may pale in comparison to the standard deduction. In this case, it is more beneficial for those filers to still claim the standard deduction instead of itemizing since they gain more financially by not itemizing. Finally, to some people, the idea of having to save documentation and receipts for every little deduction is cringe-inducing. For those people, even though itemizing may save them a couple additional dollars, they prefer to eliminate the headache and just take the standard deduction. By opting for the standard deduction, filers eliminate the worry of being audited by the IRS for claimed deductions and the need to produce proof and documentation.

tax receiptOn the flip side, for many people, itemizing deductions is much more advantageous financially speaking. With deductions for charitable giving, medical expenses in excess of 10% of AGI, mortgage interest, and countless other items, many filers prefer to wade through the difficulties of itemizing because of the money it saves them. If filers total up their estimated deductions and find that the total exceeds the standard deduction, they will likely want to go ahead and forgo the standard deduction and instead opt to itemize their deductions. Filers need to keep in mind, that when itemizing deductions, documentation is key! Anything you choose to itemize needs to have a paper trail in case you get lucky and are randomly chosen for an audit by your friends at the IRS!

Not sure whether itemizing or opting for the standard deduction is best for you? Allow Wealth Builders CPAs & Consultants to help you! Our expert staff knows that every individual situation is different. Allow our friendly team to help to guide you. We will make sure to choose the path which will lead to the least possible tax liability. If you choose to itemize, allow our staff to make sure that you aren’t missing out on any valuable deductions! Let us help you to minimize your tax liability and maximize your refund! We have promotions for the 2018 filing season for both new and existing customers! Existing customers that refer a new customer for tax season will receive a $25 gift card and the customer they refer will get $25 off their first tax filing fee. New customers will receive $25 off their first filing fee with us. Whether you choose to itemize or take the standard deduction, make sure you choose the option that is best for YOU.  Call us today for a free consultation!

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“Federal Standard Tax Deduction for 2017 and Other Tax Years.” EFile, www.efile.com/tax-dedution/federal-standard-deduction/.

“Standard vs. Itemized Deductions.” H&R Block, www.hrblock.com/tax-center/filing/adjustments-and-deductions/standard-vs-itemized-deductions/.