Local accountant, Mary Edwards, says January is the busiest part of tax season. The stress of the job is coupled with major changes this year, due to the Tax Cut and Jobs Act in 2017.
Specifically, the doubling of the standard deduction is causing many of her low and moderate income clients anxiety because they’re no longer able to itemize.
Before, Edwards explains, many of her clients could write off medical expenses, property taxes, and charitable donations.
The new standard deductions are:
$24,000 married couple
$18,000 head of household
The new deductions make itemizing impossible for more than 80 percent of American taxpayers.
Edwards believes in the short-term, people in all brackets will experience some benefit.
Her high wage earners, she says, are the most likely go over the standard deduction. Businesses benefit most because their provisions are permanent, the doubled standard deduction expires in 2025, Edwards explains.
Brewton Couch, United Way of Greater Knoxville’s vice president of branding and marketing says the nonprofit, which serves 119 programs within the Knox County area, isn’t seeing a lot of change due to the tax changes yet.
Couch says the nonprofit serves more than 106,000 people with anything from helping kids read to putting food on the table. Holding on to charitable giving, she says, would mean less help for the people of Knoxville, since they grant dollars from year to year.
While she believes the great impact could begin this year, she’s optimistic people will still give to their mission.
“We are looking at all the tools and all the things we can do to combat multiple changes when it comes to what it takes to encourage people to give, get involved in the community and give back to local nonprofits such as ours,” she said.
“It’s a lot of anxiety. You have a lot of people who have been tracking those items for 20, 30 years and when you tell them ‘that’s not going to count for you this year,’ even if the double deduction does cover them it still promotes a lot of teeth clenching, because they’re nervous. What does that mean for their tax bill at the end of the year?”
Edwards predicts giving will decrease in 2019 or people will begin bunching their gifts, after people realize the changes to itemizing this tax season.
She says there are ways for some people to write off charitable giving.
One of them is “bunching” gifts. For example, if you normally gave $10,000 a year, you could save it, combine it with year two’s $10,000 contribution and when you figure property taxes or medical expenses, you could surpass the threshold.