Tax reform changes likely to reduce number of taxpayers who itemize
The Internal Revenue Service advised taxpayers that the doubling of the standard deduction due to tax law changes is likely to reduce the number of taxpayers who normally itemize.
In previous years, about one of three taxpayers itemized. The IRS expects that number to be less for tax year 2018. The Tax Cuts and Jobs Act (TCJA) passed in December 2017, significantly affects deductions in several ways, impacting those taxpayers who normally itemize.
The TCJA doubles the standard deduction amount for all filing statuses. The standard deduction is a dollar amount that reduces the amount of income on which a taxpayer is taxed and varies according to their filing status. Because of this, many qualifying taxpayers may find the increased standard deduction more than their total itemized deductions and opt for choosing the standard deduction rather than itemizing.
Taxpayers should check 2017 itemized deductions to make sure they understand what the tax reform changes could mean for their tax situation in 2018. Those who still plan to itemize will complete an updated version of Schedule A, Itemized Deductions, and attach it to their tax return.
TCJA made the following changes:
* Increase the standard deduction
* Suspend personal exemptions
* Increase the child tax credit
* Add a new credit for other dependents, and
* Limit or discontinue certain deductions.