2018 IRS Standard Deductions and Exemptions

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Last updated on June 3, 2018 Views: 1361 Comments: 31

There are some big changes in the standard deduction and exemptions for 2018. We have all the numbers here and how the change will affect tax payers.

Most taxpayers can choose between itemizing tax deductions and taking the standard deduction. Itemizing, which requires accurate record-keeping, allows you to take deductions for specific expenditures from the tax year. The standard tax deduction is a fixed amount. Either way, your deductions reduce the amount of your taxable income. So they reduce the amount of overall taxes you owe.

Generally, if you can show that you’ve had more deductible expenses than the amount of the default standard deduction, it’s better to itemize. This way, you reduce your taxable income by more. So you’ll pay less in taxes.

However, if you don’t have enough itemized deductions, taking the standardized deduction works out best.

In 2013, only about 30% of U.S. households itemized their deductions in 2013, the most recent year for which data is available. With 2018’s increased standard deduction amount, there’s a good chance that this number will go down even more. With a higher standard deduction, it will be more difficult for taxpayers to itemize enough to cross that threshold.

IRS publication 501 outlines each year’s deduction amounts. There are some cases where you can make adjustments to the standard deduction. For example, if you are 65 or older, or if you are blind, you get a higher standard deduction.

Taxpayers used to also be able to take a personal exemption of around $3,000, depending on the tax year. This provision has been repealed for 2018, so this is no longer available.

What Tax Reform Means for Deductions

The recent tax reform bill has significantly increased the standard deduction. It has also decreased the number of itemized deductions that are allowed. These factors combined mean more taxpayers will likely take the new, higher standard deduction.

Here’s a historical overview of what the standard deduction has been since 2010:

Tax Year20182017 2016 20152014 2013 2012 20112010
Single$12,000 $6,350 $6,300 $6,300 $6,200 $6,100 $5,950 $5,800 $5,700
Married filing jointly$24,000 $12,700 $12,600 $12,600 $12,400 $12,200 $11,900 $11,600 $11,400
Married filing separately$12,000 $6,350 $6,300 $6,300 $6,200 $6,100 $5,950 $5,800 $5,700
Head of household$18,000 $9,350 $9,300 $9,250 $9,100 $8,950 $8,700 $8,500 $8,400
Personal exemptionRepealed $4,050 $4,050 $4,000 $3,950 $3,900 $3,800 $3,750 $3,650

As you can see, the standard deduction is now much higher. Another major increase came with the child tax credit. Now, taxpayers can deduct $2,000 per qualifying child, with a maximum refundable amount of $1,400. This tax credit starts to phase out for married taxpayers filing jointly at $400,000 in income and at $200,000 in income for all other filers.

What Does it Mean for You?

Of course, the main question for most tax filers is, “How does this affect me?” Well, it really depends on a huge combination of factors. Check out this article for an in-depth overview of the major changes the bill introduced. But here are a few bottom-line takeaways to consider:

  • You’re more likely to take the standard deduction. The higher standard deduction alone will be enough to push many taxpayers into taking it rather than itemizing. But taxpayers who used to itemize due to hefty mortgage interest, lots of charitable contributions, or high state and local income and property taxes may find those more-limited deductions aren’t enough to push them over the threshold now.
  • Taxes may be simpler in some ways but more complex in others. Taking the standard deduction is, indeed, simpler than itemizing. But it may take some time to hash out all the practical implications of this tax law. So be prepared for some complications along the way.

You can use calculators like this one to get an idea of exactly how the new tax bill is likely to affect you.

Remember, this tax law takes effect in 2018. So when you’re filing your 2017 taxes in early 2018, the 2017 deductions and personal exemption still apply.

Article comments

31 comments
Emily says:

There’s always a catch…
We are Married Filing Jointly. We itemize because mortgage interest and high medical expenses. Our itemized deductions are around $36,000 for 2017. We also get 2 personal exemptions totaling $8100. That’s $44,100 for 2017.
Based on the table above, this year (2018) we have approximately $36,000 itemized deductions and no personal exemptions. That’s 36,000 for 2018.
It looks like the burden this year will fall on tax payers who are itemizing. In our case, it is $1190 extra in taxes (effective tax bracket 14.7%).
Let’s not forget that 2015 and 2016 medical expenses exceeding 10 percent of AGI were deductible for tax payers under 65, instead 7.5 percent in previous years.

kikkenit2 says:

Where I live $24k itemizing is a $500,000 home loan.
This new tax law just dropped $10k in my home value
and losing the personal exemption cost me $500 a year.
My federal income taxes just went up a lot.

kikkenit2 says:

The child tax credit has been there for years. If you gross
$400k it goes up. Worthless for everybody I know. Have more
than 1 child and you pay $500 more now for every child.
$12k higher standard deduction only covers 2 adults and 1 child.

willie says:

“taxpayers can deduct $2,000 per qualifying child”…..I thought this was a credit, not a deduction.

Rob Berger says:

It is a tax credit.

Sherry Brist says:

New to this using Turbo software so I’m fresh to this but there best results for me was Standard Deduction. Now is that what’s going to be giving to me or is that I owe them money and I won’t be receiving a refund can anybody help me please

Anonymous says:

Capital gains are taxed at a lower rate because the proceeds from the investments are used to create and/or sustain businesses that HIRE people. Also investors do not always make money. Many times they LOSE money. The lower tax rate is to give them incentive to put their money at RISK which allows more people to be HIRED. Also, LOSSES from investments are LIMITED in their deductibility, while their gains must be reported without limit.

Anonymous says:

Last year I gave each of my seven children $4000 as a gift. Is that deductible?

Johnowhite says:

This is a common question. The simple answer is, no. Nor is it income to the recipients.

gotr31 says:

It isn’t that hard to figure out your itemized deductions if you use tax software.

faithfueledbennetts says:

I have always taken the standard deduction in the past. Taxes are a gray foggy area for me, so it’s always nice to be educated on any of it!

faithfueledbennetts says:

I have always taken the standard deduction in the past. Taxes are a gray foggy area for me, so it’s always nice to be eductaed on any of it!

jillianb says:

I’m a 20-something so it’s all about the standard deduction. I just started up my own company so soon there will be a whole new host of tax issues to look out for. I’m looking forward to the challenge.

Anonymous says:

I figure it both ways every year and take the larger (obviously!) Because we move a lot, and sometimes live in rentals and sometimes live in houses we own, the best choice changes every year.

Just because you own a home doesn’t automatically mean that the itemized deduction is a better choice for you. If your mortgage interest is small, even including mortgage interest may not bring your itemized deductions up to the amount of the standard deduction. Plus, less paperwork with the standard deduction!

Anonymous says:

If you use tax software it will figure both and tell you which is better.

Anonymous says:

A dependent doesn’t increase the standard deduction for their parents, do they? Instead they get their own, which is equal to their earned income plus $300, but no lower than $950 and no higher than $5,800.

Anonymous says:

I always take the standard deduction because I too rent. Though I am not as young as some of the others who have said this. And being married just makes the standard deduction twice as big 🙂

Anonymous says:

I’ve never itemized because I’m young and rent. In fact, I’m not even sure what qualifies when you itemize.

Anonymous says:

Currently, I itemize, but expect to go to a standard deduction when I retire. If circumstance change, I change with it!

ajonesin says:

I am a standard deduction kind of guy. I never have enough itemized deductions to match it, but I always check.

mrtrend says:

I usually check which option gives me the smaller tax bill. Using an online software like Turbotax, first I do my tax using the standard deduction and I write down the final tax bill. Then I switch from standard deduction to itemize. If the new tax bill is higher, it only takes me a second to switch back to standard deduction. I always plan on itemizing (keep all my receipts) because I never know how much I will end up spending on health care.

tbork84 says:

I am in the 20-something/single/renter category, so I will take the standard deduction and not worry about it. As far as I understand it, without a mortgage there are very few reasons that would justify itemizing.

kurt.moeller says:

I let an accountant handle it, between that and a small business it is simpler letting a professional decide what the best option is for me. That way I don’t have to worry as much that there is a mistake present!

Anonymous says:

Concur with the above posting 110%!

We pay our CPA/Tax Preparer $275/year (that’s just 75 CENTS/day annualized!) to prep & submit (electronically) BOTH our Fed & State personal income taxes – it’s always money well invested!

While his fee is not deductible (we’re fully retired) – his expertise ensures our income & deductions are correct. He reviews ALL associated supporting paperwork for accuracy (e.g., 1099-Rs, investment gains/losses, mortgage interest & property tax verifications, non-business energy tax credits), often finding deductions we would have overlooked had we tried to do our returns ourselves. Furthermore, as a ‘signer’ attesting to his preparation work, we no longer worry about an audit as we’ll have a true professional at our side!

Sarah says:

I’ve always just taken the standard deduction, mostly because I’ve used online software to file my taxes and the itemized deductions always seemed so complicated, I was afraid I would make some sort of mistake.

Anonymous says:

We definitely itemize. This is primarily driven by owning a home, which includes interest expense and property taxes that are included in the itemized deductions.

Anonymous says:

I itemize as well due to mortgage interest and student loan interest.

John Zoe says:

These deductions should NOT be allowed. All this does is encourage individuals to go into debt. One wonders why people in this nation believe ‘debt is good’? Savings is good. Make the sacrifice to save and then pay in ‘cash’ for the things that you need. All it takes is DISCIPLINE.

cstrunk says:

I’m young (early 20s) and a renter, so I don’t think I’ll be itemizing anytime soon. It’s all about the adjustments and credits for me!

rewards says:

I itemize mainly due to high property taxes.

Anonymous says:

The standard deduction is about all you get when you’re retired. With the exception of one year where Medical Expenses (Dental expenses not covered by Medical Insurance) exceeded the standard deduction, all of my filings have been based on the standard deduction. But I’m looking forward to taking more exemptions when I turn 65 in a couple of years – followed by my wife a couple of years later. I guess those extra exemptions are like having a nice scenic view appear on your way downhill… 🙂