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A Simple Rule of Thumb For the Federal Tax Deduction


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    I used to easily qualify for itemized tax deductions, but the 2017 tax law changed that over night. The standard deduction was in the low $6,000 range for single tax filers and in the low $12,000 range for couples filing jointly for many years, but that amount doubled with the passage of the The Tax Cuts and Jobs Act in late 2017.

    That isn't necessarily a bad thing. Now every tax filer, at a minimum, can take an automatic $12,000 - $24,000 deduction (more for seniors, blind individuals, and dependents) off the top before doing anything at all. That's a lot of money and many people won't be able to find enough qualifying deductions for it to make sense to itemize deductions.

    2020 will be the first year my wife and I will have enough qualifying deductions for it to make sense for us to itemize our deductions since the new tax law went into effect, but that's mainly because we donated one of our cars, among a number of other things. I wouldn't be surprised if we go back to taking the standard deduction when we file our 2021 taxes, but who knows...maybe we'll decide to donate our other car.

    So should you itemize or take the standard deduction when you file your taxes? Ask yourself one question - will I be able to deduct more than $12,400 (single/married filing separately), $24,800 (married, filing jointly), or $18,650 (head of household)?

    If you answered yes to any of those questions then itemizing your deductions is probably the smart way to go. If you answered no then you will likely want to take the standard deduction.

    It's as simple as that.

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    Agreed. New tax code changes made this very simple. I used to feel like I needed a tax pro to run all the numbers and it was worth it to pay $200-300 as a self-employed individual to find this answer out. But now, thankfully I do not.
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    Milton Wrote: Agreed. New tax code changes made this very simple. I used to feel like I needed a tax pro to run all the numbers and it was worth it to pay $200-300 as a self-employed individual to find this answer out. But now, thankfully I do not.
    Totally agree with both of you on this one. At first it was a pain before the new tax code. I considered a tax pro as well. My wife and I file the same way.