When You Should Itemize Your Taxes 

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One of the biggest questions this tax season is whether to take the standard deduction, a flat reduction in your adjusted gross income, or to itemize, or use applicable tax deductions to lower your AGI. Obviously, you’ll likely want to choose whichever lowers your AGI the most, so you pay less in taxes.

This year, the standard deduction is, essentially, doubling from last year to $12,000 for single filers and married filers filing separately, $24,000 for if you’re married filing jointly and $18,000 for heads of household, while some other itemized deductions have been eliminated or made less valuable (the standard deduction will increase slightly for 2019). And that makes it a whole lot more attractive to take the standard deduction this year (note: there are some rare occasions in which you cannot take it).

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“People who normally itemize may end up taking the standard deduction this year due to the Tax Cuts & Jobs Act nearly doubling the standard amount,” says Christina Taylor, Senior Manager of Tax Operations at Credit Karma Tax. And if you don’t think it’s worth the effort to figure out which is more valuable, that’s ok. “Many filers choose to take the standard deduction for simplicity.”

So what should you choose? It will vary depending on each unique tax situation, but Fidelity offers this rule-of-thumb:

Start with your tax returns for 2016 or 2017. If your situation is similar in 2018, and your itemized deductions fall below the new standard deduction ($12,000 individual/$24,000 MFJ), you will likely not itemize. If your total deductions exceeded the new standard deduction, you need to consider the new rules for deductions.

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You still might want to itemize if you own a home or if you have very high medical expenses, for example. Fidelity has a good breakdown of changes to deductions here.

“Make sure you include all the things you can itemize, even if they’re small—like property tax on cars, or clothes you donated to Goodwill,” Nathan Rigney, lead tax research analyst at The Tax Institute at H&R Block, writes in an email.

If you use a filing service like Credit Karma, for example, it will tell you which option works out best for you so you don’t have to do the math yourself. “If you’re using tax software, it’s probably worth the time to answer all the questions about itemized deductions that might apply to you,” writes NerdWallet. “The software or your advisor can run your return both ways to see which method produces a lower tax bill. Even if you end up taking the standard deduction, at least you’ll know you’re coming out ahead.”

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The TCJA also eliminates personal exemptions, which were worth $4,050 each for the taxpayer, their spouse and any dependents.

“These exemptions could really add up for families with children and/or other dependents, such as elderly parents,” Bob Charron, partner at Friedman LLP, an accounting firm, writes in an email. “For 2018 through 2025, the TCJA suspends personal exemptions, but increases to the child credit and a new family credit could offset this for some taxpayers.”

Changes to the standard deduction could also make up for some of the losses.

If you’re still having trouble deciding or have a complicated tax situation, see a tax professional for help.

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