Itemized Deduction vs Standard Deduction and Tax Refund

[reachresources]

I completed our tax return but have not filed because I see that we barely got a tax refund of about $300.00 instead of some thousands that we used to get in previous years.

We have an itemized deduction of about $40,000 and a standard deduction of $27,000. We spent over $13000 on charity and over $16000 in mortgage taxes. I had thought we would get a good refund in our tax return this year but we got about $300.00. My wife and I are retired and living on a pension and social security.

What is responsible for this poor refund? Did I do anything wrong in filing?

[xmasbaby0]

You say you are living on retirement income.  Did you have tax withheld from that income?  You cannot get a bigger refund than the amount of tax you had withheld.  And now that the tax laws changed for 2018 and beyond, it is very difficult for many people to have enough deductions to itemize.  There are limits on certain deductions that were new for 2018 and beyond.

Are you making the common mistake of just adding up all the amounts for your itemized deductions without considering the caps and thresholds that must be met?

STANDARD DEDUCTION

Many taxpayers are surprised because their itemized deductions are not having the same effect as they did on past tax returns.  The new higher standard deduction and the elimination of certain deductions, as well as the cap on state and local taxes have had a major impact since the new tax laws went into effect beginning with 2018 returns.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income.  It is not a refund. 

2019 Standard Deduction Amounts

Single $12,200   (+ $1650 65 or older)

Married Filing Separate  $12,200   (+ $1300 if 65 or older)

Married Filing Jointly $24,400   (+ $1300 for each spouse 65 or older)

Head of Household $18,350  (+ $1650 for 65 or older)

Look on line 9 of your 2019 Form 1040 to see your itemized/standard deduction amount

[Anonymous]

you do not get both the standard deduction and itemized deductions.  since your $40,000 in itemized deductions exceed the $27,000 standard deduction, that's what you get and it should be reflected on the 1040 line 9.  if you get social security up to 85% is taxed.    also aas xmasbaby0 suggests look at your total taxes line 16 and compare to taxes already paid line 19

[reachresources]

Thanks so much for the detailed explanation.

[reachresources]

Thanks so much.

[PhantomII154]

My itemized deductions exceeded the standard deduction but are not showing in my federal refund.

[xmasbaby0]

@PhantomII154 

Are you making the common mistake of just adding up all the amounts for your itemized deductions without considering the caps and thresholds that must be met?

STANDARD DEDUCTION

Many taxpayers are surprised because their itemized deductions are not having the same effect as they did on past tax returns.  The new higher standard deduction and the elimination of certain deductions, as well as the cap on state and local taxes have had a major impact since the new tax laws went into effect beginning with 2018 returns.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income.  It is not a refund.  You will see your standard or itemized deduction amount on line 12 of your 2022 Form 1040.

2022 STANDARD DEDUCTION AMOUNTS

SINGLE $12,950  (65 or older + $1750)

MARRIED FILING SEPARATELY $12,950  (65 or older + $1750)

MARRIED FILING JOINTLY $25,900  (65 or older + $1400 per spouse)

HEAD OF HOUSEHOLD  $19,400  (65 or older +$1750)

Legally Blind + $1750