If my itemized deductions are several thousands of dollars greater than the $27,400 SD, why would Turbotax be telling me that we'd get a greater refund by using the SD?

[xmasbaby0]

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 2020 Form 1040.

2020 Standard Deduction Amounts

Single $12,400   (+ $1650 65 or older)

Married Filing Separate  $12,400   (+ $1300 if 65 or older)

Married Filing Jointly $24,800   (+ $1300 for each spouse 65 or older)

Head of Household $18,650  (+ $1650 for 65 or older)

[MissMCJ]

That is something that really could only be answered by seeing the actual figures.  In normal circumstances, TurboTax will advise you to take the deduction that gives the highest refund.  Since it is telling you to take the SD, there is probably some threshold limiting what you have claimed.

For example:  If you are under the age of 65, you can only deduct total medical expenses to the extent your expenses exceed 10% of your adjusted gross income for the tax year.  Any medical deduction over that threshold would not be applied.  

Normally there is a charitable deductions threshold, but that was suspended for 2020.  Where some of your medical expenses paid from a health savings account.  That could be make a difference.  Go through them carefully and look up the tax limitations for each one.  There is a reason why TurboTax is recommending SD.

[SteamTrain]

@MissMCJ 

The floor for medical deductions was returned to 7.5% for 2019 and 2020

It's still 10% for (Later Edit:  Congress has  now it changed to 7.5% going forward, 2021 too)  2021...but of course, the new congress could rescind that...

[NCperson]

@MissMCJ  - where did you see 10% - can you please send us the link so we can all share as these questions come up?  

please review line 3 of the link below

https://www.irs.gov/pub/irs-pdf/f1040sa.pdf

thx 

For example:  If you are under the age of 65, you can only deduct total medical expenses to the extent your expenses exceed 10% of your adjusted gross income for the tax year.  Any medical deduction over that threshold would not be applied.  

[MissMCJ]

@NCperson - You are correct.  I was using an example from memory and 2020 is, of course, not 10%.

[sweetie652]

Thank you!!

[SteamTrain]

Ahhh...AND....the latest congressional bill signed last week  (Consolidated Appropriations Act , 2021),

.....returned the Medical Deductions  cutoff to 7.5% for 2021 and all future years  (well..until they change it again)