For many taxpayers, 2020 is going to be a new year; there’s a projected increase in the standard deduction. This knowledge is key to how you shall spend; it’s crucial that you are aware that the increase is minimal before going out there and start spending.
Since the increase in the standard deduction is minimal, there is every chance that you will not notice the difference in your paychecks across the entire year.
Under the tax overhaul of 2018, there’s been a decrease in the number of taxpayers itemizing their tax reductions.
There’s a high expectation that over 90 per cent of taxpayers will have to settle for standard deduction for the years 2019 and 2020.
Opting for standard deduction is better compared to itemizing. For a lot of taxpayers, standard deductions will lead to a smaller comprehensive liability. You should, however, keep checking and possibly make a better use of the potential benefits of itemizing your tax deductions.
Every year, the Internal Revenue Service (IRS) determines the standard deduction. The decision for 2020 would see a slight increase in deductions.
The 2020 Standard Deduction
You are allowed to take a specific size of standard deductions, which all depends on your yearly filing status 0f tax return. The standard deduction in 2020 will increase from $200-$12400 for single individuals the same as the married who will be filing separately.
Filing your taxes as the head of a house will see your standard deduction gaining from $300-$18,650.
In 2020, the married couples who have done a joint filing will see an increase of standard deduction to the tune of $400 to possibly $24,800.
With the projected increase in the standard deduction, a few individuals will likely itemize deductions this year.
Itemizing or the Standard Deduction. Which One?
Well, different taxpayers have their preferences when it comes to these two. For some, choosing between the two goes to as far as considering the ease of getting their taxes done. Other taxpayers bases their choices on the options that will see the year having the lowest overall tax bill.
It’s as simple as this, married couples with over $24,800 tax deductions need to consider itemizing. It’s advisable that you opt for the standard deduction in case you have fewer tax deductions compared to the amount.
It calls for more work and time for you to be in a position to itemize your tax deduction.
Therefore, those that are at the level of standard deduction level have it a little easier as they choose the standard deduction. If, for instance, you have $24,900 tax deductions and not sure of the whereabouts of your receipts, a standard deduction option might just what you need.
The Itemizable Tax Deductions
Tax Cuts and Jobs Act (TCJA) did away with the most valuable tax breaks and, at the same time, capped several others. Proactive tax planning presents opportunities to reduce your tax bills.
Below are some of the itemizable tax deductions:
Under the regime of Donald Trump, the mortgage deduction has reduced to only the first $750,000 of mortgage debt. However, it’s a little different for those that acquired their mortgage before December 15th, 2017, as they’re still able to debit up to $1 million mortgage debt. Over time, there’ve been added restrictions implemented on those deductions, which makes it necessary that you talk with CPA so that you are aware of the amount of mortgage deduction you are likely to qualify for.
Federal and Local Taxes
Even though you still qualify to deduct both your local and state taxes, this deduction caps at a meager $10,000 per year. The homeowners in California and New York, for example, are filling the pinch.
Giving Donations and Charity Campaign
For individuals who tend to donate to charity campaigns and nonprofit organizations, it’s always likely that they receive a tax deduction.
You can have the donations as goods, machines, or cash.
However, to qualify for a tax break as an appreciation to your goodness, you’ll need a receipt.
Medical expenses are another tax break that you will find it hard to gain from. Only medical expenses that are way more than 10% of the value of your adjusted gross income (AGI) qualify for the deduction. It, therefore, means that you’ll either need to be with a meager income or extraordinarily high medical expenses so that you can gain from this program.
Other Methods of Lowering Your Taxes Beyond Itemizing
There exist many tax breaks that can come in handy regardless of your option, itemizing, or the standard deduction. A perfect instance is by making tax-saving contributions to a Traditional IRA up until the 15th day of the subsequent year. Also, you may qualify for a part of the interest of your student loan without having to itemize.
You can as well decide to deduct a portion of your self-employment tax even if you are on standard deduction.
Take Time and Settle for the Right Options
For many taxpayers, a larger standard deduction is always appealing. It doesn’t mean that you should take the standard deduction without thinking about it. Always try as hard as you can to itemize your tax deductions if you have the write-offs.
You must always file your tax returns so that you can keep the most of your hard-earned income.