Despite causing some controversy in Congress, H.R. 1, which is better known as the Tax Cuts and Jobs Act (TCJA), was signed into law by President Trump in December 2017. The TCJA, which promised some of the most sweeping tax reforms in decades, left portions of the U.S. Tax Code untouched, while making significant changes to others. Some of the largest changes affect the standard deduction, which allows taxpayers to deduct a certain amount from their taxable income. Although these changes won’t be applied until next year, it’s still important for taxpayers to learn some financial basics about standard and itemized deductions – especially with taxes due Tuesday, April 17, 2018. If you need help with itemized deductions or other aspects of your federal personal income tax return, ask about the Roseville tax preparation services offered by Cook CPA Group. We provide trustworthy tax guidance backed by more than 20 years of experience.
What is the Standard Tax Deduction?
In short, tax deductions are good news for taxpayers. Of course, the full explanation is more complicated. However, to keep it in simple terms, a tax deduction allows you to deduct certain expenses from your taxable income. As a result, you have less taxable income, which means you also have lower tax liabilities – in other words, a smaller tax bill.
There are several different types of tax deductions. However, many taxpayers choose an option called the “standard deduction,” which is a flat amount adjusted annually for inflation by the Internal Revenue Service (IRS). The standard deduction is popular because it is much simpler to use than itemized deductions, which require more calculation.
In contrast to the standard deduction, itemized deductions allow taxpayers to deduct individual expenses in specific categories – for example, property taxes or charitable contributions. While this approach is more complex and challenging, it can equate to considerable savings for some taxpayers. Ask an experienced CPA about tax services for individuals if you need help determining whether the standard deduction or itemized deductions are the better financial option for you.
Changes to the Standard Deduction Under the New Tax Laws
The Tax Cuts and Jobs Act made several dramatic changes to sections of the U.S. Tax Code. One change that could have especially significant financial impacts is the adjustment to the standard deduction.
Like most aspects of your tax return, the standard deduction is affected by your filing status. For example, the 2017 standard deduction is $6,350 for a single filer, $9,350 for heads of households, and $12,700 for a married couple filing jointly. For 2016, the standard deduction is $6,300 for a single filer, $9,300 for heads of households, and $12,600 for a married couple filing jointly. (To get an idea of how much inflation has impacted the standard deduction, just compare those figures to their corresponding amounts in 1970: $1,100 across all three categories.)
Under the new tax plan, the standard deduction will be significantly larger, roughly doubling in size for single filers. Standard deductions under the TCJA are listed below by filing status and include the following:
- Single – $12,000
- Married Filing Jointly – $24,000
- Married Filing Separately – $12,000
- Head of Household – $18,000
Blind and elderly taxpayers may qualify for an additional standard deduction, which is $1,300. As the IRS notes, “These amounts will be adjusted for inflation for taxable years beginning after December 31, 2018.”
For more information about changes to the standard deduction, taxpayers might be interested in reading Internal Revenue Bulletin 2018-10, available here. However, while IRS publications can help you identify issues to consider in your tax planning strategy, personalized tax guidance is essential for getting the most out of credits and deductions while keeping your tax liabilities to a minimum.
Get Help Filing Your Federal Tax Return from Cook CPA Group
Unless you obtain a deadline extension, you’re almost out of time to file your federal income tax return. If you file your tax return or pay your taxes late, you could receive failure-to-pay or failure-to-file penalties. If there are errors or missing information on your tax return, you could be audited by the IRS, or even placed under investigation for suspected tax evasion.
Make sure your taxes are prepared with care, precision, and skill by hiring an experienced tax accountant who is qualified to handle California and federal tax returns. Our team serves taxpayers in Roseville, Sacramento, and the surrounding area, including business owners and individuals who need cryptocurrency tax help. For tax guidance you can count on, contact Cook CPA Group online, or call our Roseville tax firm at (916) 724-1665 today.