![]() That alone exceeds an individual’s standard $6,350 deduction for 2017, and even the $12,000 deduction for 2018. This is particularly true if you bought a house recently, since most mortgages are front-loaded to pay mortgage interest rather than whittle down the principal (which is the amount you borrowed).įor instance: If you have a 30-year loan for $400,000 at a fixed 5% interest rate, in the first year of your mortgage, you’ll pay off only $5,901 in principal but a whopping $19,866 in interest. (But whatever the outcome of that calculation this year, make sure to run it again next year.) In this case, it’s a no-brainer to itemize your deductions. It’s still possible that if you own a home, your mortgage interest alone might exceed the standard deduction, says Steve Albert, director of tax services at CPA wealth management firm Glass Jacobson. Under the new law, current homeowners can continue to deduct interest on a total of $1 million of mortgage debt for a first and second home. But new buyers can deduct interest on only $750,000 for a first and second home. Why itemizing often makes sense for homeowners Miscellaneous expenses (note that this is set to expire in 2018).Unreimbursed employee business expenses.Unreimbursed medical and dental expenses. ![]() ![]() State and local income taxes or sales taxes (but not both).Real estate and personal property taxes.Home mortgage interest (note the exceptions below).Itemizing your deductions may enable you to deduct these expenses: “Buying a home has the single largest impact on your tax return,” says Steber, adding that a home purchases is “an anchor item that can move someone into the itemized taxpayer category.” That advice especially applies to homeowners. “Don’t be lulled into thinking the standard deduction is always a better answer,” Steber says. It saves you the trouble of needing to understand the nuances of tax law.Īlthough claiming the standard deduction is easy and convenient, choosing to itemize can potentially save you thousands of dollars, says Mark Steber, chief tax officer at Jackson Hewitt.It lets you avoid having to track medical expenses, charitable donations, and other itemizable deductions throughout the year.It eliminates the need to keep records and receipts of your expenses in case you’re audited by the IRS.It allows you a deduction even if you have no expenses that qualify as itemized deductions.Here are some of the benefits to taking a standard deduction: Next year, thanks to the new tax law, it will nearly double, to $12,000 for individuals and $24,000 for joint filers. Congress sets the amount of the standard deduction, and it’s typically adjusted each year for inflation.įor 2017, the standard deduction is $6,350 for single filers and $12,700 for married couples filing jointly. Nearly 2 out of every 3 tax filers claim the standard deduction, which is essentially a flat-dollar, no-questions-asked reduction to your adjusted gross income.
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