Clients are asking me if it is true that their standard deduction almost doubled. Yes it did. Does that mean they will save a lot of money in taxes in 2018? Not as much as you might think.
For as long as I have been preparing tax returns, all taxpayers were entitled to a standard deduction based on how they are filing on their return. They were also entitled to an exemption for everyone on the return. The only exception to this is a dependent being claimed on their parent’s returns. On 2017 returns, a taxpayer filing Single is allowed a standard deduction of $6,250 and a personal exemption of $4,050. A couple filing Married Filing Joint gets a standard deduction of $12,700 and two personal exemptions totaling $8,100,
Under The Tax Cuts and Jobs Act (TCJA) passed in December of last year the standard deductions went up. For a Single filer, the new standard deduction will be $12,000 on 2018 tax returns. A married couple will see their standard deduction go up to $24,000. Sounds good doesn’t it? Almost doubled. But…
Personal exemptions are gone in 2018. So, a Single taxpayer will not get the $4,050 exemption nor will the married couple get the $8.100 they get in 2017. They will still come out ahead but not like they think. Single filers will pay tax on $1,700 less not the $5,750 it sound like on the news. For Married Filing Joint taxpayers, the new changes will mean they will pay tax on $3,200 not the $11,300 they think. Sorry to be the bearer of bad news.
I’ll cover changes in personal exemptions for dependents in another post. That will be fun—not.post was originally published on this site