Free 2018 Tax Planning2019-01-05T15:05:52+00:00

Free 2018 Tax Planning

Deductions

Taxpayers are allowed to deduct the higher of the standard or itemized expenses.

Standard deduction

The 2018 standard deduction amounts are as follows:

  • Single or married filing separately: $12,000
  • Married filing jointly: $24,000
  • Head of household: $18,000

Itemized deduction

If you have deductible expenses that are above the standard you are allowed to itemize your expenses.

Deductible expenses for itemization purposes are:

  1. Medical expense above 7.5% of gross income
  2. State income taxes up to $10,000
  3. Mortgage interest – in 2018, only the interest on the first 750,000 of your mortgage is deductible
  4. Charitable contributions
  5. Casualty losses for presidential declared disaster area
  6. Other misc expenses

Other miscellaneous expenses include:

  1. Gambling losses to the extent of gambling winnings
  2. Casualty and theft losses for income producing property
  3. Loss from other activities in Schedule K1
  4. Certain unrecoverable investment in a pension
  5. Impairment related work expenses of a disabled person
  6. Deduction  of amortized bond premium
  7. Federal estate tax on income for the decedent
  8. Repayment of excess wages, unemployment compensation or other non business income over $3,000
  9. An ordinary loss attributable to an inflation indexed debt instrument like the treasury inflated protected security

Greater of standard or itemized deduction

Add up all the expenses you have that can be classified as itemized expenses. Compare it to the thresholds for standard below:

  • Single or married filing separately: $12,000
  • Married filing jointly: $24,000
  • Head of household: $18,000

If your itemized expenses is above the threshold for the standard deduction, then you will have lower taxes if you choose to itemize.

A married filing separately taxpayer will have to itemize if his/her spouse chooses to itemize. This is true even if the standard deduction is higher.

Strategies

Using the excel template

To see how these adjustments affect you personally, watch this video to see how to enter data in the template. If you do not have the template yet, you can get it here.