It sometimes said that the Tax Cuts and Jobs Act of 2017 (TCJA) ended the ability of millions of taxpayers to claim itemized deductions, and that itemizing is now only for the rich. But, while the TCJA did make it more beneficial financially for many filers to take the standard deduction, it did not prohibit anyone, no matter their income, from choosing to itemize.
The choice between itemizing and claiming the standard deduction is no different than it was prior to the TCJA and any taxpayer can itemize deductions when filing their income taxes. However, after TCJA, many more taxpayers pay less in taxes by taking the standard deduction rather than itemizing. In addition, using the standard deduction makes it possible to lower their taxes without having to keep track of itemizable expenses through the year.
From the inception of the modern individual income tax system in 1913, taxpayers have been able to deduct certain expenses from their taxable income. While this may have required burdensome recordkeeping (no credit card statements or computer spreadsheets a century ago), only people with very high incomes owed taxes. That changed with World War II, when the income tax was extended to most US households. Because so many people had to start keeping records to itemize and claim deductions, Congress simplified tax filing in 1944 by introducing a standard deduction.
People could then choose to itemize or to claim the standard deduction. This not only made filing easier, it also allowed those with few deductible expenses to use the standard deduction and reduce their taxable income.
Over the years, the standard deduction went through many changes, and by 2017 the standard deduction was $6,350 for a single filer, $9,350 for a head of household, and $12,700 for a married couple filing jointly. Thus, single filers with less than $6,350 in itemized deductions were better off taking the standard deduction both because it is simpler and it lowered their taxable income. As a result, about 70 percent of households chose the standard deduction while about 30 percent of filers itemized.
The TCJA changed that calculus for many filers. For 2018, it raised the standard deduction to $12,000 for single filers, $18,000 for heads of household and $24,000 for married couples filing jointly. It also capped at $10,000 one of the most commonly used itemized deduction, the one for state and local taxes. As a consequence, the Tax Policy Center estimates that in 2018 only about 19.3 million filers — or about 13 percent— will choose to itemize.
But this doesn’t mean that other taxpayers can’t itemize. They can, but they would be increasing their taxable income and need to keep records of their deductible expenses.