Over 28M Taxpayers Will Be Better Off With Trump’s New Expanded Standard Deduction
- Single taxpayers now have a standard deduction of $12,000.
- Joint filers have a standard deduction of $24,000.
- Fewer filers will have to itemize deductions.
President Donald Trump ran for president on a platform that, among other things, promised income tax reform. The Tax Cuts and Jobs Act of 2017 made vast changes to the tax code, including raising the standard deduction for single filers from $6,500 to $12,000, and from $13,000 to $24,000 for taxpayers who file jointly.
When filing income tax returns, taxpayers can choose to itemize their deductions or use the standard deduction. They can then apply the deduction to the amount of income that is subject to tax. A higher deduction reduces your taxable income so you pay less in taxes.
Click to read about the best and worst ways to itemize deductions.
Trump’s New Standard Deduction: Single Filer Example
As an example, suppose a single taxpayer earned $175,000 in 2018. She paid interest on her mortgage, made charitable contributions and paid interest on student loans, for a total of $13,500. She can itemize her deductions because they total more than the standard deduction. She’ll subtract the deductions from her taxable income to arrive at her adjusted gross income, or AGI. This is the amount she will pay taxes on. So, she’ll be taxed on $161,500.
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Trump’s New Standard Deduction: Joint Filing Example
Now suppose a couple filing jointly earned a total of $125,000 in 2018. They paid interest on their mortgage and made charitable contributions that added up to $14,250. That amount is less than the standard deduction for taxpayers who are married and file jointly, so they’ll take the standard deduction of $24,000. This is the amount that will be deducted from their gross income to get their adjusted gross income of $101,000, the amount they’ll be taxed on.
Fewer Taxes for Nearly 29 Million Americans
The Tax Foundation estimates that 28.5 million taxpayers will fare better with the new, larger standard deduction than they did under the old deduction. This includes everyone who took the old standard deduction, as they will now be able to reduce their taxable income by an additional $5,500 for single filers and $11,000 for joint filers. In addition, anyone who itemized deductions and could deduct less than $12,000 or $24,000 for single and joint filers will also benefit. Tax filing should be faster and less complicated for taxpayers who no longer need to itemize deductions.
Find Out: To Boost Your Income Less Than 2%, Trump Just Increased the Deficit by Billions
The changes made by the Tax Cuts and Jobs Act of 2017 will remain in force until Dec. 31, 2025. At that time, the tax code will revert to its previous status unless Congress votes to extend them. The House of Representatives passed a bill making the cuts permanent in September 2018, though it’s unlikely the bill will move past the Senate.
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More on Taxes
- How to Maximize Your Charitable Giving Under the New Tax Law
- Tax Deductions 2018: 42 Tax Write-Offs You Don’t Know About
- Take Advantage of These 16 Commonly Missed Tax Deductions
- Watch: The Most Important Tax Changes for 2018
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