Considerations

Although a standard deduction may be easier to file and has less risk of an audit, the 2017 Tax Act temporarily modified the structure of several itemized deductions, including:

State and Local Tax (SALT)

The SALT deduction allows taxpayers to deduct taxes paid to state and local governments. The 2017 Tax Act capped the SALT deduction at $10,000 per household. Upon sunset, the cap will expire.

Mortgage Interest

Today, you can deduct interest paid on the first $750,000 (if married filing jointly) of home mortgage debt acquired after December 15, 2017 (it had been $1 million). No deduction is permitted on similarly timed home equity loans (it had been $100,000). Upon sunset, the limit will return to $1 million in home mortgage debt and $100,000 in home equity debt.

Medical Expenses

There are many medical expenses that can be included in your itemized deductions, whether the expense was for you, your spouse or a dependent, so long as they exceed a minimum percentage of adjusted gross income. The 2017 Tax Act reduced that floor to 7.5%. Upon sunset, it will revert to the previous floor of 10%.

Overall Limitation

The 2017 Tax Act suspended the overall limitation on itemized deductions from tax years 2018 to 2025, known as the Pease limitations. Prior to 2018, the amount of itemized deductions allowed for the tax year was reduced by 3 percent of the taxpayer's adjusted gross income, capped at 80% of the amount of the deduction. Upon sunset, the Pease limitations will be reinstated.

Personal Exemption 

Before the 2017 Act, a taxpayer could take a personal exemption for themselves, spouses and dependents at slightly over $4,000 each. The Act reduced the exemption to zero. Upon sunset, the personal exemption will return (it is indexed for inflation, so the value would be closer to $4,800).

Have a conversation with your Relationship Manager and personal tax advisor to determine the optimal timing of your deductions over the next few years.