Will the Higher Standard Deduction Really Pay Off at Tax Time?

Will the Higher Standard Deduction Really Pay Off at Tax Time?

Will the Higher Standard Deduction Really Pay Off at Tax Time?

One of the biggest changes created by the Tax Cut and Jobs Act is the increase in the Standard Deduction. Essentially the standard deduction doubled for all types of filers. In 2017, if you were a single filer (or married filing separately) your standard deduction would have been $6350. In 2018,that number jumps to $12,000. For filers who are married filing jointly the number increases from $12,700 to $24,000. The standard deduction for head of household filers jumps from $9,350 to $18,000 in 2018.

Other Factors to Consider

This seems like a big win for most taxpayers. However, things aren’t always, as they seem. On paper, what’s not to like about an increase of nearly 50 percent? Nothing. The problem is there are several other factors in play that might end up negating the benefit of the increased deduction. In fact, depending on your tax situation the new standard deduction rates might not help you at all. Here are three situations that could reduce, or completely eliminate, the benefit of the new standard deduction rates.

Personal Exemptions–

this will likely play the greatest role in how much you benefit from the new standard deduction. In 2017, the amount for each exemption you claimed was $4,050. That means, for a family of five, the total amount received in exemptions was $20,250. Assuming you used married filing jointly status, and you claimed the standard deduction that was a total of $32,950in deductions. With the personal exemption now gone and the standard deduction set at $24,000, that means you would lose $8,950 in exemptions. The more personal exemptions you claimed previously, the greater the hit you’ll take. This could really hurt larger families.

Itemize Deductions–

One of the purposes of the increased standard deduction was to reduce the number of people claiming itemized deductions. While most taxpayers take the standard deduction, those who itemized typically saved substantially more. If you still want to itemize your deductions you can. But chances are, fewer people will be able to claim more than the standard deduction. That means, if you claimed $22,000 in itemized deductions last year that $22,000 of deductions would mean nothing this year, because the standard deduction is set at $24,000. If your itemized deductions are still higher than the standard deduction, then this won’t affect you. But for most taxpayers it will eliminate several items they used to be able to count on to reduce their tax bill.

Decreased Itemized Value–

and speaking of itemized deductions, it might be tougher even for those who had more than the standard deduction last year. There are new rules regarding itemized deductions, including the new $10,000 cap on deductions paid for state and local taxes. This could be especially damaging to high net worth individuals. It could hurt those in high-tax states even more. So, if you relied on those taxes in the past to make your itemized deductions count, it could be more difficult to surpass the new higher standard deduction rates this year.

 

We hope you found this article about “Will the Higher Standard Deduction Really Pay Off at Tax Time?” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

To receive our free newsletter, contact us here.

Subscribe to our YouTube Channel for more updates.

Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

American-Dreams-Show-Accounting-firm-in-ca-cpa-tax-advisors-groco-alan-olsen

The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

Untitled_Artwork copy 4

MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  It’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

Posted in

The Future of Sustainability: Tony Raynor, CEO of Sustainable Green Team

The Future of Sustainability: Tony Raynor, CEO of Sustainable Green Team Watch Tony’s recent Interview with Alan Olsen: https://youtu.be/KAahQYB_LWQ Tony Raynor is the Founder, President and CEO of The Sustainable Green Team, a company working to bring sustainability to our world. Sustainable Green Team, Ltd., through its subsidiaries, provides storm/disaster recovery services. It offers tree,…

Tony Raynor

The Man that Grows Water in Dirt, Tony Raynor CEO of Sustainable Green Team

Transcript: Alan Olsen Hello, this is Alan Olsen and welcome to American Dreams. I’m here today with Tony Raynor. Tony, welcome to today’s show. Tony Raynor Alan, it’s wonderful to be here. Thank you, Alan Olsen Tony, you’ve had the most amazing journey in your life, when there has been, will fill with a lot…

Taking Over the Family Business with Pamela Kan, President of Bishop-Wisecarver Corporation

Taking Over the Family Business with Pamela Kan, President of Bishop-Wisecarver Corporation See Pamela’s recent interview with Alan Olsen on Youtube: https://youtu.be/-KvsbCcfmaM Pamela Kan has been the President of Bishop-Wisecarver Corporation since 1999. She is a highly respected leader in the manufacturing and engineering industry, and has been instrumental in growing the company into the…

Igniting Others With Kary Oberbrunner

Igniting Others With Kary Oberbrunner See Kary’s interview with Alan Olsen on Youtube: https://youtu.be/IfPrM7b9LII Do you struggle through life feeling lost? Do you want to find your dream job or perform better at your current day job? Are you looking for a new secret weapon for mastering life? Kary Oberbrunner is a Wall Street Journal…