Katsmeow
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 11, 2009
- Messages
- 5,308
So people who won't be able itemize because std deduction increased come out ahead, correct? And everyone loses the personal exemption, right?
Yes, they lose personal exemption. But no people who won't be able to itemize because of the increase in the standard deduction don't necessarily come out ahead. They may or may not.
For example - let's say that under the old law you could itemize and got the benefit of the itemized items plus exemptions.
Married filing jointly standard deduction was $12700. Plus you get $8100 total for exemption. This is for couple with no kids. (I am not including in this the over 65 deduction).
So, let's say your itemized deductions were $22,700.
You would itemize deductions plus get the exemptions and your taxable income would be $30,800 less as a result.
Under new law you don't get the exemptions. Your standard deduction is $24,000. Since your itemized deductions are less than that, you won't itemize. So, your taxable income is now $24,000 less as a result.
In other words, your taxable income would be $6,800 more under the new plan than it would be under the old law.
You can also imagine situations where someone under the old law had $30,000 or $40,000 in itemized deductions and under the new law would not have deductions as high due to the SALT limitation or other changes.
Now -- as to whether your taxes would go up or down for 2018 it will depend on how all of that shakes out for you and you have to factor in changes in tax brackets and tax rates.
It gets even more complicated for people with kids who lose the personal exemptions but there are changes in child tax credits.