Question

The Tax Cuts and Jobs Act of 2017 ("the Act") made substantial changes to both the standard deduction and many itemized deductions.

Use internet tax resources to address the following questions. Look for reliable websites and blogs of the IRS and other government agencies, media outlets, businesses, tax professionals, academics, think tanks, and/or political outlets.

1. Explain how the Act changed the standard deduction.

2. Choose five categories of itemized deductions and describe in detail how the Act changed each deduction.

3. In general, how will the changes to the standard deduction and itemized deductions affect taxpayers?

Answer 1

Answer to question :

The TCJA expanded the the standard deduction from $6500 to $12000 for single filers and $13000 to $24000 for joint filers. The standard deduction has nearly doubled and at the same time it limited the value of itemized deductions . It is more attractive to taxpayers to use standard deductions. Also the three provisions that reduce household income taxes based on household size were consolidated into two and eliminated the personal exemption.It simplified the code for many Americans

Under the new law married couples are much benefited. Now they can opt for standard deduction of $24000 as against $14000 itemized deduction prevailed earlier ,which was more complicated and time consuming.As per the estimate of JCT the number of itemized filers will be reduced from 46.5 million in 2017 to 18 million in 2018 a considerable shift from itemized deduction to standard deduction. In other words around 88% of tax filers will use standard deduction for tax payment.

The itemized deductions of middle income group will reduce by 75% The TCJA raised the child tax credit from $1000 to $2000 per qualified child, a 100% increase. It also raised the income level from $110000 to $400000 for married couple jointly. These two provisions are a big relief to tax payers.

The percentage limit of charitable donation increased to 60% from existing 50% allowing individuals to donate more to charitable organization and thus by to claim deductions.