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posted Jul 9, 2020 11:17:37 AM

why does tax owed not reduce when entering dedfuctions

After entering income my federal tax due is $xxxx.xx but when I enter deductions such as Real Estate Tax, Mortgage Interest,  Charitable contributions the federal Tax Due is not reduced?

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1 Best answer
Level 15
Jul 9, 2020 11:25:46 AM

TurboTax automatically applies the standard deduction to your taxes when you first begin. It will continue to use the standard deduction until you enter enough itemized deductions to total more than the standard deduction. TurboTax will automatically switch to itemized deductions when they total more than the standard deduction.

 

There are limits and/or thresholds on certain itemized deductions. Only the amount of deductible medical expenses in excess of 7.5% of your AGI can be deducted. The SALT deduction (real estate taxes, state and local income or sales taxes, and other deductible taxes) are limited to a maximum of $10,000. Many deductions that could be taken prior to 2018 have been eliminated. 

 

Standard deductions were substantially increased beginning with tax year 2018:

Single - $12,200 add $1,600 if age 65 or older
Married Filing Separately - $12,200 add $1,600 if age 65 or older
Married Filing Jointly - $24,400 add $1,300 for each spouse age 65 or older
Head of Household - $18,350 add $1,600 if age 65 or older

 

 

2 Replies
Level 15
Jul 9, 2020 11:21:03 AM

It could be that the Standard Deduction is still more than all your itemized deductions.

Or maybe you are already getting back all that you can and more deductions won't increase it.

 

Itemized Deductions or the Standard Deduction can only reduce your income to zero and not create a refund.  Then you only get back any withholding taken out.

 

TurboTax starts off using the Standard deduction, so until your Itemized Deductions are higher than the Standard deduction your refund would not change.  Or it will just change a little at a time as you increase your deductions over the standard amount.

 

And by increasing your deductions it will decease your income and you may not be getting as many credits as before.   Also after you reduce your income to zero there is no more refund to get back but you still may owe for other things like self employment tax or the 10% early withdrawal penalty from 401k or IRA accounts.  

Level 15
Jul 9, 2020 11:25:46 AM

TurboTax automatically applies the standard deduction to your taxes when you first begin. It will continue to use the standard deduction until you enter enough itemized deductions to total more than the standard deduction. TurboTax will automatically switch to itemized deductions when they total more than the standard deduction.

 

There are limits and/or thresholds on certain itemized deductions. Only the amount of deductible medical expenses in excess of 7.5% of your AGI can be deducted. The SALT deduction (real estate taxes, state and local income or sales taxes, and other deductible taxes) are limited to a maximum of $10,000. Many deductions that could be taken prior to 2018 have been eliminated. 

 

Standard deductions were substantially increased beginning with tax year 2018:

Single - $12,200 add $1,600 if age 65 or older
Married Filing Separately - $12,200 add $1,600 if age 65 or older
Married Filing Jointly - $24,400 add $1,300 for each spouse age 65 or older
Head of Household - $18,350 add $1,600 if age 65 or older