Standard Deduction

[Robotti4]

For may years, I have itemised deductions and my tax prep has been streamlined as we are a W2 family.  In 2021, I liquidated stock in connection with the purchase of a home.  Our salaries are higher, and most line items in Schedule A are the same or higher.  However, Turbo Tax is applying the Standard Deduction (which also increased from prior periods) which is much lower than last year.  Could this be correct?  

Thank you

Mike 

[VolvoGirl · Accepted solution]

Some deductions are limited now.

There is a max 10,000 limit (5,000 MFS) of property tax and state taxes "SALT". SALT is State And Local Tax. Which includes property tax, any state tax paid like for last year’s return and includes any state withholding from your W2s and any 1099s you have. And any taxes in W2 box 14 and 19 like SDI or VDI. You can only deduct up to 10,000 (5,000 MFS) for SALT State and Local Taxes.  And job expenses are no longer deductible.  

If it's giving you the Standard Deduction and not showing you Schedule A you can check the actual amount of itemized deductions by using by going to

Tax Tools on left

Tools - Topic Search (top left box)

Type in itemized deductions, choosing. It should highlight that in the list, click on GO

Then Click on "Change my deduction". That will display the actual amount of itemized deductions vs. the standard deduction. (Be sure to uncheck "Change my deduction" after checking it so you do not lock in the wrong deduction.

How to change between the Standard Deduction and Itemized Deductions
https://ttlc.intuit.com/community/accessing/help/how-do-i-change-from-the-standard-deduction-to-item...

And see Deductions that have been suspended 2018-2025
https://ttlc.intuit.com/community/tax-reform/help/which-federal-tax-deductions-have-been-suspended-b...

The Standard Deduction for Joint is  25,100 + 1,350 for each 65 and over or blind.  And you can also deduct 300/600 MFJ in addition to the Standard Deduction.  So together it might be more than your itemized deductions. 

[Hal_Al]

The standard deduction increased (actually doubled) in 2018.  For 2021 it is $25,100  Married Filing Jointly (under 65). 

You may need to look at your 2018, 2019, and 2020 returns to see if you took the best option. 

[Robotti4]

Thank you, very helpful.  

Still surprised my itemised deductions are much lower than last year whereas the entries were not that much different.  But it seems like there have been changes on limits that impacted this. 

[RaifH]

If your mortgage interest deduction looks substantially off from last year, it could have to do with how TurboTax is calculating the average mortgage balance. 

Since you purchased a new home this year, TurboTax takes the beginning balance reported on Form 1098 and the ending balance that you fill in as your balance on January 1, 2022. It then takes the average of these two numbers to determine the average mortgage balance which determines what percentage of your mortgage interest is deductible if your balance is over $750,000. It does this with both homes to determine your overall mortgage balance. 

However, since you did not carry the loan on the new home for the entire year, you can also calculate the average balance by taking the monthly average. Take the outstanding mortgage principal reported in Box 2, multiplying it by the number of months you had the home, and dividing by 12. Use that number as the Outstanding mortgage balance in Box 2 and you may see a larger deduction for your interest.