It’s a new world of taxes — as many will soon learn to their dismay.
The new tax code passed in late 2017 for this year has turned the tax world upside down, with old strategies no longer applying, according to tax pros.
“The biggest mistake people can make is assuming the old rules and strategies continue. Things have changed a lot,” says Jackie Perlman, principal tax researcher for H&R Block. She warns those using the old rules could pay more in taxes.
Many in high-tax states like New York, New Jersey and Connecticut have long reduced their federal taxes by ignoring the standard deduction and itemizing state and city taxes as well as various fees, reducing their federal tax bills. However, now those taxpayers may be better using the new standard deduction, tax pros say.
For people in high-tax states it used to be an easy decision to itemize, says Bernard Kiely, a certified public accountant in Morristown, NJ.
But, with many of these deductions reduced or eliminated, and with the standard deduction greatly expanded, the issue is less straightforward.
Itemized deductions are now capped at $10,000. Kiely says this also makes the standard deduction a better bet for many.
The Trump tax changes almost double the standard deduction — $24,000 for joint filers and $12,000 for single filers. Those over 65 get an extra break.
Kiely said he and his wife “will be taking the standard deduction. It will be the first time we did it in 15 years.