The new law has greatly changed the way you will itemize deductions in 2018 compared to 2017. First, the Act increased the standard deduction to $24,000 for married couples. This means you need at least this amount in itemized deductions to itemize. Second, the Act has capped the amount of state and local taxes that you can deduct to $10,000 per year. Here in South Dakota this would primarily be sales tax and real estate taxes. (Business real estate taxes are not affected) Third, for new mortgages, the Act has lowered the amount of mortgage debt eligible for the home interest deduction, and interest on home equity loans is no longer deductible, even on legacy loans. When we take these three items into account, many more individuals will now be taking the standard deduction and it is more important than ever to look at opportunities to bunch your deductions every other year.
As always, check with the tax professionals at Ketel Thorstenson CPAs for these and other tax matters because each situation is different. Don’t navigate the difficult and ever changing tax codes and legislation on your own. KTLLP CPAs and tax professionals receive advanced training and continuing education all year long to keep our service on the forefront of the tax industry.