A lot is changing this year (meaning next filing season) in regards to taxes, how they’re computed, and a lot of us in the industry are going to be playing catch-up when the dust finally settles.
But most people care about one thing when they hear the tax landscape is going to be completely different: How does this affect me?
I’m not going to tell you whether you’ll be paying more or less in taxes or getting a bigger refund (although best estimates puts it at about 75% of filers will see sizable reductions in their tax bill).
That’s not bad.
We’re not going to be talking about that, though. We’re only going to discuss one aspect of the bill, and that’s the standard deduction and what’s happening to it.
What is the Standard Deduction?
The standard deduction is one option you have if you do not itemize your deductions. Every year the amount changes because it is indexed for inflation.
However, it makes it so the first $X of the money you make is tax free. In the 2017 filing season, the standard deduction for most filers was $6300, but the amount changes based on your circumstances.
I Heard The Standard Deduction Was Going Away
A lot of things are going away next filing season, but the standard deduction is not one of them. In fact, the GOP wants to nearly double the standard deduction to $12,000. This means the first $12,000 of a single filer’s ($24,000 for married couples filing jointly) will be completely tax free.
And that is how most Americans will be getting that sizable tax cut this coming year.
But this is certainly a little ways away, and for now our concern is the current tax filing season and our current tax code.
Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.