Over 28M Taxpayers Will Be Better Off With Trump’s New Expanded Standard Deduction

Mandatory Credit: Photo by Andrew Harnik/AP/REX/Shutterstock (9930772r)President Donald Trump smiles while speaking at a rally at Alumni Coliseum in Richmond, KyElection 2018 Trump, Richmond, USA - 13 Oct 2018.
Andrew Harnik/AP/REX/ / Shutterstock.com

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.

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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.

Click to keep reading about the most — and least — tax-friendly major cities in America.

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