I‘m pretty sure I will not be itemizing in 2018. As a married filer (A very happily married filer) my standard deduction will be $24,000—that is double the amount allowed in 2017.
What about mortgage interest—that can be way more than $24,000 all by itself? This is true. However, the IRS will be reviewing how you accumulated your debt and if they find cars and travel and kids education causing the loan to be so large, the interest related to this part of the debt will not be deductible. In addition, new purchases or refinances in post 2017 will limit the debt $750,000 instead of the $1.1 million in previous years.
What about all the taxes we pay? For many, their real estate and sales tax deductions alone exceed $24,000. The new Trump tax law limits all tax deductions on Schedule A to a maximum of $10,000.
The brokerage fees I pay on my managed portfolio is always high enough to let me itemize. That was true in the past but not for 2018 and forward. The section on Schedule A that allows this deduction has been eliminated.
Employee business expenses—I’m a W-2 employee and take thousands of dollars of deductions for expenses on Schedule A—can I still do that? The answer is no. There is no longer a place on Schedule A to deduct these unreimbursed expenses.
Then tell us, who will itemize in 2018? Assuming we are talking about a married couple, and $24,000 is the standard deduction, here is the game plan: Max deduction for taxes is $10K. Assume $5,000 in charitable giving. That leaves us $9,000 short so we need at least $9,000 of qualified interest expense—divide by 4% and that would be a loan of at least $225,000.
For many of you—the standard deduction will be the way to go.
Thanks for listening and I will talk at you again.