Trump’s new tax law has caused a lot of confusion. One of the big areas of confusion is that many of the so-called “itemized-tax deductions,” won’t really count for most American taxpayers anymore. It’s not that those deductions are gone, it’s just that triggering the threshold where itemizing tax deductions saves you more money than taking the standard tax deduction has moved.
New “Smaller” Tax Forms
Politicians are always lying and claiming victory when they have achieved no such thing. One thing many politicians tried to take credit for with the new Trump tax law was making taxes simpler. They did… kind of… sort of…
My favorite part of the new tax law is that you can “file your taxes on a postcard.” <insert super eyeroll> You know, if you use both sides of the postcard… with no space for any sort of address for mailing it… and if anyone still used postcards, which the IRS does not recommend for filing your taxes.
The official IRS 1040 form would indeed fit on an non-mailable postcard. If you printed it front and back.
Sound dumb? It is.
Still, here we go, the official IRS Form 1040.
Wait a minute. That IS dumb. Now it takes two pages even though it would fit one page.
You are completely right, but it WOULD fit on a postcard, you see. What matters is that it CAN fit on a postcard, even though no one files on a postcard, and it takes two sheets of paper to print, thereby wasting a sheet of paper for millions of Americans.
Are you so proud of us politicians? We did it. A completely meaningless, symbolic, phony goal has been achieved.
What’s that? Schedule 1, 2, 3, and 4 all take a sheet of paper too, and they could be combined into fewer sheets of paper?
Don’t trifle us with details, peasants! We are politicians, and we have done a false improvement, and we will not be denied our glory.
New “Bigger” Standard Deduction
In order to make filing taxes “simpler,” the politicians who came up with the same great idea of half-sheet tax form split onto two pages, came up with the great idea of limiting or eliminating some tax deductions (including the personal exemption), and instead giving you a larger standard tax deduction.
Will that save you money?
Well, if you didn’t itemize, it should probably save you some money on taxes. If you did itemize, it may, or may not save you on taxes. Either way, now more than ever you’ll need a professional tax preparer or some tax software like the free Credit Karma tax software to figure out what is going on with your taxes, that will take you multiple sheets to file what used to fit on one-sheet.
Enjoy your tax victory, American peasants.
What Still Can Be Deducted
While lots of tax deductions still exist, they won’t be used by millions of Americans folded under a bigger tax deduction. That means wasting your time calculating moving costs, or other smaller itemized tax deductions is less important that ever.
However, there are still tax deductions that you can take, outside of the new, shiny, big standard tax deduction
- Child Tax Credit – The Child Tax Credit comes off at line 12, after you’ve used your standard deduction, so that still counts, even if you don’t itemize.
- Business Expenses – You’ll still need a Schedule C, and all of your business deductions still get taken there, regardless of the new standard deduction. Schedule C flows through on Schedule 1, which flow through on the “back” of the postcard, on Line 7.
- Capital Losses – You didn’t really expect politicians to mess with the favorable treatment investors get did you? Capital Gains, and losses, go on Schedule 1, and then through to line 7.
Also, the stuff that you get to deduct on Schedule 1 (also, a sweet, paper-wasting half-page form), still counts. It flows through on line 7 of the IRS Form 1040.
- Educator Expenses – The pathetic amount teachers are allowed to deduct for spending their own money in classrooms.
- Health Savings Account Deduction
- Self-Employed Deductions
- Moving expenses for military
- IRA Deductions
- Student Loan Interest deduction
Your other deductions like Charitable donations, and the like, are likely to be less valuable, unless your mortgage interest brings you close to the $24,400 (joint) standard deduction.