Level 7

Tax reform

This is the conundrum many face this year as a result of the New Tax Law.  Increasing the Standard Deduction (doubling it) has had some profound impacts.

1.  It will reduce the number of Tax Returns Itemizing by a factor of 6.  In other  words approximately 30% of all taxpayers itemized in 2017; in 2018 that figure drops to around 5%.  The obvioius advantage to this change is simplicity: less paperwork, calculations and audits when Shedule A drops off.  Shedule A is ripe for an audit....The Standard Deduction is not.  

 

2.   It would almost appear as if the Feds act completely independently of the States when it comes to tax.  Recall most states use Federal AGI as a starting point and most states require consistency with respect to Itemizing or Standard Deduction.  So, if the taxpayer uses the Standard on the federal no problem----that deduction doubled.  But what about the states; they did NOT double their Statndard Deduction.  This is the conundrum JudyMo finds herself in.  There are a few large cities in the US that add another layer of complexity; Kansas City is one of them.  It's problematic because many in the area work in MO but Live in KS (Johnson County in particular).  This results in generating a "Crossfile" between states.