Itemize vs standard deduction?

[mary_monstera]

Hello!

Thank you for taking the time to answer questions. 

I am a new homeowner. 

I have previously used the standard deduction on my taxes. 

Does it make sense to plan to itemize for 2022?

If so - should I be adjusting my withholding with my employer (typical W2 employee). 

Thank you!

MM.

[Critter-3]

Does it make sense to plan to itemize for 2022?  If your total itemized deductions are higher than the standard deduction then you should itemize.

If so - should I be adjusting my withholding with my employer (typical W2 employee).  Don't jump the gun just yet ... you may not be able to itemize at all especially  in the year you buy the home. 

[Rangers44]

Hi Mary_Monstera,

Due to the recent tax law changes that went into effect in 2018 under the Tax Cuts and Jobs Act, Congress modified the Standard Deduction upward and eliminated Personal Exemptions.

So, unless you have Itemized Deductions in TOTAL that are greater than $12950 for Single filers, $25900 for Married Filing Joint or $19400 for Head of Households, that will determine whether you have the CHANCE to Itemize or will have to live with the Standard Deductions.

Secondly, based on the state you live in, regarding the level of property taxes your home could be subject to, the State and Local Income Tax deductible Limit (including property taxes) is $10,000.

You really would not need to adjust your withholding taxes, as it would be more prudent to have more cash flow to pay for your new mortgage.

[JaredS_CPA]

Hello Mary,

Thank you for participating in our Ask the Expert event today. Congratulations on the new home!

While buying a new home certainly could be a reason to itemize, it all depends on how much you pay in mortgage interest, property taxes and other itemizable deductions. This article is an excellent resource to help you figure that out.

As for your withholding, here is a calculator that will help you estimate what your taxes might be so you can figure out whether to increase your withholding or not.

Good luck.

[SundayInSalem]

Buying a home does not always mean you will have enough deductions to itemize, especially if you bought a home mid-year because you would only have a half year’s mortgage interest and property taxes to deduction.

Verify that you will be able to itemize before doing anything.

The standard deduction for married couples in 2022 is $25,900 and $12,950 for single taxpayers and those filing separately. The deduction for head of household is $19,400.

IRS provides tax inflation adjustments for tax year 2022

On top of that, just because you can itemise doesn’t mean you will save a lot of money. For example, if you are married and have itemised deductions of $26,000, that’s only $100 more than the standard deduction of $25,900, so you may save $20.

You can use the free TurboTax TaxCaster app to estimate you refund with your home.

Congratulations on becoming a homeowner!