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| Pathways Advisory Group, Inc. Dustin J. Smith, CFP® |
The tax code was simplified.
With a larger Standard Deduction (amount all taxpayers can deduct, if
greater than the total of your itemized deductions), many of you can stop tracking
itemized deductions altogether. As a
matter of fact, it’s so easy now, you could practically file on a napkin
yourself!
HA! Back to reality…
The Federal Tax Cuts and Jobs Act (TCJA) of 2017 eliminated some
itemized deductions, capped a few that remained and nearly doubled the Standard
Deduction to $24,000 for joint taxpayers ($12,000 for individual filers). However, it did not make your tax filing any
simpler than it was before. As a matter
of fact, a new complication is the ability to itemize on your California tax filings
despite taking the Standard Deduction federally.
California did not alter its own tax code as a result of new
federal tax laws. As long as your total California itemized deductions exceeds the
modest California standard deduction of $8802 for joint taxpayers ($4401 for
single filers), you benefit from itemized deductions. This has not changed.
Further, since the California tax code remains unchanged, some
miscellaneous tax deductions that were eliminated federally by the TCJA, remain
deductible on your California filing. Investment
management fees, tax preparation fees and unreimbursed employee expenses, for
example, remain deductible on your California filing.
Also, newly capped
itemized deductions at the federal level such as a $10,000 limit for property
taxes paid, experience no such limitation in California. California
income taxes paid were never deductible in California, so nothing
changes there.
In the end, despite less federal tax incentive to donate,
utilize mortgage debt, pay for tax and/or financial advice (among the other itemized
deductions removed from the federal code) for some, the approach is the same. Continue tracking potential itemized
deductions the way you always have, and pay your accountant’s bill with
pride. With countless new Forms, schedules, software updates and the surprise of many Americans around the amount due at tax time, they’ve earned it!
Dustin J. Smith, CFP®
This is not intended to be tax advice, but purely educational. Please consult your tax professional about your personal tax situation.
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