Hi Mark Kohler here CPA and Attorney and I'd like to talk about
itemizing versus the standard deduction
This is a big decision because it can have a huge impact on your tax return and save you a lot of money a lot
of taxes
now in 2018 the rules changed but the best way to understand the rules in 2018 is to understand what they were before and
2017 and many of you of course are preparing your 2017 tax return so let's break it down what you need to know
When it comes to itemizing in the standard deduction
Now of course the the general plan here is you want to add up all your itemizing and see if it exceeds the standard deduction
Now in 2017 the standard deduction was a lot less around $6,000 single and about
$12,000 married that's been doubled for 2018 that's the standard
So you want to add up all your itemized and see if it exceeds that
And of course you want to take the higher number so let's go through the itemized deduction list now there's five main pieces to itemizing
number one is
medical expenses and this could be a big one for a lot of families they spent a lot on medical and
this is your out-of-pocket medical co-pays deductibles
prescription drugs chiropractic acupuncture
service dogs service animals you know that sort of thing all that added up you want to look at that number and
anything above ten percent of your adjusted gross income is
deductible
So it's only the amount above that number so you do the math you say what's my adjusted gross income let's say fifty thousand dollars
multiply it by ten percent that's five thousand dollars and then anything above that would be deductible so if you had six thousand in
medical you'd get to deduct one thousand dollars that's the first figure in your itemized deductions
number two is mortgage interest now this was a phenomenal
Write-off for many many years it's changed dramatically you're going to want to watch the video on mortgage interest
But in 2017 still a pretty darn good ride on now what you're going
To do is take all of your interest on up to a million dollars worth of?
Mortgages on a qualified residence and you get to deduct the mortgage interest on a heloc or a second mortgage up to
$100,000 worth of that mortgage
Whatever the interest is on that amount so you add that up and that's your mortgage interest figure for let's say twenty seventeen third
charitable donations
this is a nice one you want to put this into lists you're gonna add up again these five numbers number three being charity and
this includes up to five hundred dollars of just clothing items that you might leave in goodwill or salvation
army get a little receipt as you drive through and drop off your items and
that's gonna be five hundred dollars plus you know all those things you might make a donation for for your church or whatever and keep
The receipts that's your charitable figure?
number four is salt state and local taxes this is a big one there was no limit in
2017 so we need property taxes you paid state income taxes local taxes add all that up and that's line number four
finally number five
miscellaneous deductions now this is kind of a grab-bag there's a variety of items in it like unreimbursed employee
Expenses tax preparation fees investment expenses you're gonna add up all those items and they go into this
miscellaneous column now you can only deduct those items over above 2% of your agi
So you if you made
$100,000 you take 2% which is 2,000 that's the floor and then anything above that would be deductible so if you had
$3,000 of miscellaneous and you get to deduct
$1000 cuz that's the amount over the - now in summer you take those five items
again we're gonna go through it medical mortgage interest
charitable the state and local and the miscellaneous you're gonna add up those five items and see what the total is if it's greater than
Your standard deduction you're in the money take that and it's gonna save you taxes when you start to
you late your taxable income now quickly i want to tell you what the rules are for 2018
you don't need to worry about this if you're preparing your return for 17
But you might want to know this just as you go to spend money in 2018
maybe realizing you're not going to get a ride out for this and and
be aware of those type of expenditures now like i said earlier the standard deduction has been doubled but in
2018 also the itemized deductions have been limited let's go through some highlights real quick first medical
pretty good thing here the expenses for medical are now deductible above seven and a half percent of agi
not
Ten percent so we get a little more of a window there the charitable deductions same not a big deal there but salt major
Problems state and local income taxes all of those taxes are added up and limited to a ten thousand dollar maximum number
It's going to hurt a lot of people in states where they may pay a lot in state taxes and used to be able to
deduct that as an itemized deduction now the mortgage interest
major
Changes fairly complicated 2shot a separate video on that watch it when it comes to mortgage interest because that's gonna play into your
maybe strategy for buying a home this year or doing any refinancing but it's been limited and then finally the miscellaneous itemized deductions
gone entirely no deduction there anymore so in summary and 2018 millions of americans are gonna be
choosing the standard deduction rather than itemizing because it's been limited so much and then a lot of americans that still have itemized deductions but
they're limited you're gonna pay more in taxes this is why this new tax bill has winners and losers be aware of this gather your
records and input this information so you can make the best decision during tax preparation
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