Standard Deduction vs Itemizing - Experience this year

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kaudrey
Posts: 1143
Joined: Fri Nov 22, 2013 1:40 pm

Re: Standard Deduction vs Itemizing - Experience this year

Post by kaudrey »

On a net basis, we were negatively affected.

Without a mortgage, our itemized deductions were only about $12-14K (I forget now). So, standard deduction of $24K.

However, in VA, if you take the fed standard, you have to take the VA standard, which is only $6K. So, we owed more in VA tax than we were expecting, but it didn't make sense to itemize on Fed after that. I had never thought about it before because we always itemized until this year. Live and learn.
TBillT
Posts: 1001
Joined: Sat Sep 17, 2011 1:43 pm

Re: Standard Deduction vs Itemizing - Experience this year

Post by TBillT »

prd1982 wrote: Tue Apr 09, 2019 7:21 am
TBillT wrote: Mon Apr 08, 2019 10:34 am Some states like Va. and Md. are taking the opportunity to increase state taxes based on TCJA. So if you do not itemize on Federal, you lose a substantial state tax deduction.
I think you are unfairly accusing the states. It is typical for states to require federal itemized in order to use state itemized. Just think of what the state would have to implement to support itemization:

* They would need a new form to enter the deductions.
* They would need new processes to duplicate the processing the fed form provides.
* They would need to develop audit rules to ensure minimal cheating.

Currently the state can count on the feds to do most of the heavy lifting for itemization. I don't see that changing.
Edit- Let me say it this way:
You could say Va. , Md. did the correct tax policy for society.
All of the states have a wide range of optional alternatives in response to TCJA.
For example, New York decided to allow itemizing on state even if you take Federal standard.
So the state can do whatever the state wants to do.

However wise and fair the new state tax policy is: some of us (I call us "borderline itemizers") are hit with a bigger tax bill on the state side. So I am saying two things for Md, and Va Bogleheads: (1) if you are in that category, be aware (that you need to consider itemizing due to state taxes) and (2) consider ways to manage that. 2018 I managed it by taking less Roth IRA conversion. 2019 I may make some bigger donations with appreciated stock etc
TBillT
Posts: 1001
Joined: Sat Sep 17, 2011 1:43 pm

Re: Standard Deduction vs Itemizing - Experience this year

Post by TBillT »

Artful Dodger wrote: Tue Apr 09, 2019 7:27 am We’re similar that with one of us 65, the standard deduction was $26,300. I knew last year, with the changes, I would take the standard deduction. Property tax and state income tax came in around $14k but would have been capped at $10k. We’re at the tail end of our mortgage, and interest was around $3600. Our charitable deductions are in the $5k - $6k range. So, even without the SALT cap, we would have been below $25,300.

We already had a DAF, so in 2017 I added $22k to it, to get an the extra deduction while I could. I’m thinking that will fund about what we’ve been giving towards charity until spouse hits 70, then we’ll do via QCDs.
DAF (Donor Advised Fund) sounds interesting....I had not considered that idea.
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