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Step 1: Form 1040. Step 2: Dependent Exemptions or Credits. Step 3: Itemize your deductions. Step 4: Include deductions with tax return. Step 5: Reduce your tax by your tax credits.
Itemizing means deducting each and every deductible expense you incurred during the tax year. For this to be worthwhile, your inevitable deductions must be greater than the standard deduction to which you are entitled. For the vast majority of taxpayers, itemizing will not be worth it for the 2018 and 2019 tax years.
You can claim the standard deduction or itemize deductions to lower your taxable income. The standard deduction lowers your income by one fixed amount. On the other hand, itemized deductions are made up of a list of eligible expenses. You can claim whichever lowers your tax bill the most.
If the amount on Line 40 of last year's Form 1040 ends with a number other than 0, you itemized. If this amount ends with 0, it's likely you took the Standard Deduction. If this amount ends with 00 or 50, you probably took the Standard Deduction.
The standard deduction amounts will increase to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly and surviving spouses. For 2019, the additional standard deduction amount for the aged or the blind is $1,300.
For married couples filing jointly, the standard deduction is increasing by $400, up to $24,800 for the tax year 2020. With an increase in the standard deduction, we may see even fewer people itemize deductions in 2020. Many homeowners will still find it beneficial to itemize their tax deductions.
In 2020 the standard deduction is $12,400 for single filers and married filers filing separately, $24,800 for married filers filing jointly and $18,650 for heads of household.
If you're used to claiming itemized deductions on your federal tax return, tax reform may have a surprise in store for you in 2019. More than 45 million taxpayers itemized deductions in 2016, according to the IRS. If you were one of those people, that might change for the 2018 tax year.
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