Before the new tax reforms, around 55% to 60% of American taxpayers were choosing to take the standard deduction instead of itemizing their expenses. Now that the law has changed, the standard deduction amount is nearly doubled from $6,350 in 2017 tax year to $12,200 for 2019 tax year (taxes due April 2020). The number of taxpayers who took the standard deduction to reduce their taxable income jumped to somewhere between 80% to 90%. Even though this is good for many taxpayers, there have been some other eliminations to the exemptions such as personal and dependent exemptions.
Although this sounds confusing at first and some may think that now the government is able to get more taxes even with a doubled standard deduction. This is completely wrong as everything is balanced at a point where it actually allows you to pay less tax. The whole purpose of these changes is to simplfy the tax code so that both the IRS and the taxpayers won’t have to do all that work over taxes.
When it comes to the itemizing your expenses to reduce your taxable income, the only thing you need to do is obvious. If your itemizable expenses exceed the standard deduction amount, again, which is $12,200 for 2019/2020 tax year, you should go with itemizing. However, we suggest that if your itemizable deductions exceed the standard deduction amount only the slightest bit, consider taking the standard deduction as you will need to fill all the forms and collect receipts from those expenses. Also, since the IRS asks for proof for every single expense that you want to itemize, there is a chance that you may lose your receipts or the IRS may simply find an error and decline.
There have been some eliminations on itemized deductions with the new tax law, to learn more about the itemizable deductions that are no longer available click the link below.