Itemizing vs Standard Deduction - The Rules Have Changed! Mark J Kohler | CPA | Attorney - YouTube

Hi Mark Kohler here CPA and Attorney and I'd like to talk about

itemizing versus the standard deduction

This is a big decision because it can have a huge impact on your tax return and save you a lot of money a lot

of taxes

now in 2018 the rules changed but the best way to understand the rules in 2018 is to understand what they were before and

2017 and many of you of course are preparing your 2017 tax return so let's break it down what you need to know

When it comes to itemizing in the standard deduction

Now of course the the general plan here is you want to add up all your itemizing and see if it exceeds the standard deduction

Now in 2017 the standard deduction was a lot less around $6,000 single and about

$12,000 married that's been doubled for 2018 that's the standard

So you want to add up all your itemized and see if it exceeds that

And of course you want to take the higher number so let's go through the itemized deduction list now there's five main pieces to itemizing

number one is

medical expenses and this could be a big one for a lot of families they spent a lot on medical and

this is your out-of-pocket medical co-pays deductibles

prescription drugs chiropractic acupuncture

service dogs service animals you know that sort of thing all that added up you want to look at that number and

anything above ten percent of your adjusted gross income is

deductible

So it's only the amount above that number so you do the math you say what's my adjusted gross income let's say fifty thousand dollars

multiply it by ten percent that's five thousand dollars and then anything above that would be deductible so if you had six thousand in

medical you'd get to deduct one thousand dollars that's the first figure in your itemized deductions

number two is mortgage interest now this was a phenomenal

Write-off for many many years it's changed dramatically you're going to want to watch the video on mortgage interest

But in 2017 still a pretty darn good ride on now what you're going

To do is take all of your interest on up to a million dollars worth of?

Mortgages on a qualified residence and you get to deduct the mortgage interest on a heloc or a second mortgage up to

$100,000 worth of that mortgage

Whatever the interest is on that amount so you add that up and that's your mortgage interest figure for let's say twenty seventeen third

charitable donations

this is a nice one you want to put this into lists you're gonna add up again these five numbers number three being charity and

this includes up to five hundred dollars of just clothing items that you might leave in goodwill or salvation

army get a little receipt as you drive through and drop off your items and

that's gonna be five hundred dollars plus you know all those things you might make a donation for for your church or whatever and keep

The receipts that's your charitable figure?

number four is salt state and local taxes this is a big one there was no limit in

2017 so we need property taxes you paid state income taxes local taxes add all that up and that's line number four

finally number five

miscellaneous deductions now this is kind of a grab-bag there's a variety of items in it like unreimbursed employee

Expenses tax preparation fees investment expenses you're gonna add up all those items and they go into this

miscellaneous column now you can only deduct those items over above 2% of your agi

So you if you made

$100,000 you take 2% which is 2,000 that's the floor and then anything above that would be deductible so if you had

$3,000 of miscellaneous and you get to deduct

$1000 cuz that's the amount over the - now in summer you take those five items

again we're gonna go through it medical mortgage interest

charitable the state and local and the miscellaneous you're gonna add up those five items and see what the total is if it's greater than

Your standard deduction you're in the money take that and it's gonna save you taxes when you start to

you late your taxable income now quickly i want to tell you what the rules are for 2018

you don't need to worry about this if you're preparing your return for 17

But you might want to know this just as you go to spend money in 2018

maybe realizing you're not going to get a ride out for this and and

be aware of those type of expenditures now like i said earlier the standard deduction has been doubled but in

2018 also the itemized deductions have been limited let's go through some highlights real quick first medical

pretty good thing here the expenses for medical are now deductible above seven and a half percent of agi

not

Ten percent so we get a little more of a window there the charitable deductions same not a big deal there but salt major

Problems state and local income taxes all of those taxes are added up and limited to a ten thousand dollar maximum number

It's going to hurt a lot of people in states where they may pay a lot in state taxes and used to be able to

deduct that as an itemized deduction now the mortgage interest

major

Changes fairly complicated 2shot a separate video on that watch it when it comes to mortgage interest because that's gonna play into your

maybe strategy for buying a home this year or doing any refinancing but it's been limited and then finally the miscellaneous itemized deductions

gone entirely no deduction there anymore so in summary and 2018 millions of americans are gonna be

choosing the standard deduction rather than itemizing because it's been limited so much and then a lot of americans that still have itemized deductions but

they're limited you're gonna pay more in taxes this is why this new tax bill has winners and losers be aware of this gather your

records and input this information so you can make the best decision during tax preparation

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