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Tax Reform: Standard vs. Itemized Deductions

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When it comes to tax deductions, the 2018 changes to the tax law not only raised the standard deductions, it also reduced or eliminated specific deductible expenses. So can itemizing still make sense? It’s really all about the numbers. If you choose the standard route, the deduction limits have nearly doubled. On income earned in 2019, you are eligible for a $12,200 deduction or, if you are married filing jointly, $24,400. If you itemized in the past, you may find that now, the total of your itemized deductions is lower than the new standard deduction limits. Let’s look at changes the new tax law made to some of the biggest itemized deductions. The state and local tax on your income and property, known as SALT, has often been a substantial deduction. It’s now capped at $10,000, and may especially affect you if your income is higher or you live in a state with high property and income taxes. When it comes to your mortgage interest, you can still deduct it, but on new purchases, the previous $1,000,000 limit has been reduced to $750,000. There’s also been a change to your home equity loan. It’s no longer deductible, unless you use it to improve your home. Use it for anything else, like a child’s education or a car, and you can’t deduct the interest. And this change applies to existing and new loans. Additionally, the $750,000 interest limit includes your mortgage and your home equity loan used to improve your house. Previously there was a 3% overall limitation on itemized deductions, called the Pease Limitation, but that limit has been suspended, so if you itemize, be sure to include all your deductions to help ensure you get the maximum tax benefit. So run the numbers to see if your itemized deductions exceed the new standard deductions. If you are close, you may find that taking the standard deduction not only saves you time but also the expense of using a tax preparer. To learn more about the new tax law, watch the other videos in this series, or, visit

The 2018 tax law brought significant changes to itemized deductions, including mortgage interest, home equity loans, and SALT – State And Local Taxes. Find out how these changes may impact your income tax return and whether itemizing or taking the increased standard deduction is the better choice.

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Important Disclosures

This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.


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