As many people are aware by now, the Tax Cuts and Jobs Act has changed the way many people have done their yearly taxes. First of all, the TCJA doubled the standard deduction, which made the standard deduction applicable to a much larger amount of people. Then to further increase the simplicity of taxes, the TCJA eliminated or restricted previous deductions, which subsequently moved more people over into the standard deduction. The good news is there are some deductions that suffered little to no change, and may have an impact on your life.
First and foremost is medical expenses. The TCJA actually lowered the threshold for the percentage of your adjusted gross income of medical expenses you may deduct from 10% to 7.5%. What this means is that if you paid medical expenses out-of-pocket, and the cost exceeds over 7.5% of your annual gross income, you may take a deduction on the amount paid over the threshold.
Another deduction that still exists is the charitable contributions. Not only does the charitable contributions deduction still exist, but it has actually become stronger. The TCJA now allows for charitable contributions deductions to be up to as much as 60% of the individuals’ adjusted gross income, which is up from 50% in the past.
Itemizing your deductions is not for everyone, in fact one of the main purposes of the TCJA was to simplify taxes by gathering larger amounts of people under the standard deduction. Still, some exist and may use the itemized deduction. If you have questions about taxes, reach out to us at the Center for Financial, Legal & Tax Planning, Inc.