It's a question many taxpayers ask themselves each year. Should I itemize my deductions, or should I take the standard? Of course, every situation is different. But today, I break down some factors that can affect this decision.
Since the Tax Cuts and Jobs Act (TCJA) of 2017, there are six main areas where you can claim itemized deductions. Today, I will focus on four:
Medical and Dental - The catch here is that federally, only expenses exceeding 7.5% of your AGI can be deducted. In other words, if you made $100,000 last year, you can only deduct these expenses after the $7,500 threshold. It should be noted, however, that for our Arizona listeners, medical expenses are 100% tax deductible on your state return.
State and Local Tax (SALT) - This was limited to $10,000 by the Tax Cuts and Jobs Act, which will sunset in December of 2025 if Congress does not act to extend it.
Mortgage Interest - This only applies if a loan was taken out to purchase or improve a home, must be secured against the property, and can only qualify for a primary residence and secondary home (2 total).
Charitable Donations - Many of our listeners are charitably inclined and like to give to their church, alma mater, or other institution. If a gift is large enough, you may want to consider an itemized deduction.
It makes sense to itemize your deductions only if the total exceeds the standard deduction amount. For 2023 that number is $13,850 for single filers and $27,700 if filing jointly. To see if you itemized in previous years, look for a Schedule A and an itemized deduction amount on line 12 of your 2022 return.
Essentially, there are two types of taxpayers: those who will get the most benefit from the standard deduction and those who will need to evaluate this every year.
For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management: Visit them online at https://www.hoslerwm.com/
Or call them in their Prescott office at (928) 778-7666 or their Scottsdale office at (480) 994-7342.
For more podcast episodes, visit our podcast website at https://hoslerwm.com/protectingwealthpodcast/
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