Hey mark Kohler here and we're gonna talk about standard deduction versus itemizing now for everybody out there
You're an American you're gonna have to file a 1040 tax return and the rules have changed
Starting in 2018 until 2023. So you want to know the difference here because it could save you big-time on your tax return
All right, the general rule is you want to add up your itemized deductions and compare them against your standard deduction which everyone's greater
That's the one you want to take. Now, you're gonna find out pretty quickly that my item i's deductions, aren't that great
So you're gonna generally stick with standard deductions and not waste your time adding those up
But you want to know the rule so that you know when it's time to take that extra effort and figure out which one's better
Now the rules are now in
2018 2019 and tell the foreseeable future in 2023. They may get all changed up again is
$12,000 standard deduction if you're single
$24,000 if you're married finally joint now, that's where you're gonna fall on the standard deduction
Spectrum and then again compare it against the itemized deductions. Okay. Now there's five itemized deductions
You want to track the first one is medical
Now what medicals could include is all of your out-of-pocket medical expenses? Not your medical insurance?
But out-of-pocket medical like dental eyes co-pays deductibles
prescription drugs
acupuncture massage there tons of stuff
You want to keep it over to IRS Publication 502?
To look at what medical expenses might get thrown into this bucket
Now the math is you're gonna add up all those expenses and the expenses over and above
Seven and a half percent of your adjusted gross income go into the equation
So for example, if you make a hundred thousand dollars adjusted gross income
You've minus seven point five percent. So seventy five hundred and anything above that would be a deductible medical expense
So if you had eight thousand dollars in medical expenses, you could deduct five hundred dollars of medical expenses
I know it's kind of crappy
I'm not a big fan for my business owner videos, you know, I love the HSA and the HRA watch those videos
But that's the medical expense
You want to add that up anything over seven and a half percent of your AGI?
Number two home mortgage interest. Now this one got a little more complicated as well
And I've got a separate YouTube video on home mortgage interest
But here's the general rule you get to deduct the interest as an itemized deduction on your primary
resident mortgage only and in fact, its
Acquisition indebtedness. You cannot write off the HELOC interest. You can't write off interest the second home or the RV or the boat
It's only interest on your primary home
Acquisition and deadness. So if you got a HELOC to remodel the kitchen doesn't matter it's only the interest on the acquisition indebtedness
so it's kind of crappy and it's limited to
Seven hundred and fifty thousand dollars of mortgages. So or one mortgage, I know it gets crazy. So not everybody out there has a
$750,000 mortgage so it's not gonna affect you properly and that's okay
But add up that interest and that goes into the equation as well for your total itemized deductions
Number three is charity now we all give something to charity once in awhile and you may take some clothes down to Goodwill or Salvation
Army get a receipt. The first five hundred dollars are easy schmoozing
Those are great great little write off if you give away more in tithes to your church
Or you write a big check to the United Way
Or you actually give donated property maybe a car to NPR's like that
then you need a receipt and there's more forms involved, but you want to add up all your
Charitable contributions and that goes into the bucket of itemized deductions now under the tax custom Jobs Act
This was also changed. It was actually increased so you could give up to 60% of your AGI
So if you're a huge donor one year for some reason you actually can give more to charity and add it into your itemized deduction
Bucket now number four used to be this casualty and theft loss thing
Which got gutted under the tax cuts and Jobs Act. Now remember where the government giveth the government taketh away
So while they made a bigger standard deduction, they hammered these itemized deductions in a lot of ways
So this casualty theft loss thing was basically if a tornado hit your house and anything the insurance didn't cover
you were able to take a ride out for that or if someone broke into your home and
Cause some damage or a tree fell on your house from next door, whatever that went into this bucket
Well, that deduction is now gone. The only deduction you can take is if the federal government
declares the disaster a national federal disaster area
Then you can qualify for the loss that may occur over and above your insurance
So talk to your accountant if that's the case now
The last one I want to talk about number five is salt the state and local tax
Did this is a big one that got again gutted under the tax cuts and Jobs Act. It's affecting a lot of people
Basically, you were able to deduct all of your state and local taxes, maybe your property taxes or the taxes
You paid your state which was great. Well now it's limited in total to a maximum amount of ten thousand dollars
so if you were in
California or New York or Illinois and had fifty thousand dollars in state tax not to mention your property taxes
It's limited to ten thousand dollars. Ouch
so this is where there's a little readjustment of the middle-income tax bracket and those that are
Maybe making more money might pay more in taxes
so you want to be careful with that and make sure you
Realize what you're getting into when you get into this itemized deduction equation
Now those are the big five, but I'm not gonna mention the miscellaneous itemized deduction
Which was greater than two percent of your AGI kind of thing. It's gone entirely which was unreimbursed employee
expenses tax prep fees
Investment expenses no longer write-off under autumn eyes deductions
But what this means again is summary is that you want to look at all your itemized deductions
Add them up work with your accountant or your tax prep software plug it all in and if you're on that borderline it's worth doing
if you know that the itemized the standard deduction is going to be bigger than itemized then obviously go that direction and don't waste your
time
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