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TAXES | To Itemize or Not To Itemize, That Is The Question

When filing a personal federal income tax return, tax payers can either use the standard deductions or itemize their deductions. Up until this year, taxpayers with mortgage interest almost always itemized their deductions. However, the 2017 tax reform, aka Tax Cuts and Jobs Act (TCJA) makes the decision to itemize much more complicated.


Under the TCJA it is far less likely the sum of itemized deductions for most tax payers will exceed the increased standard deductions. The Tax Policy Center estimates the total number of taxpayers who itemize their deductions will drop by over 50% from 2017 to 2018.

Most of the TCJA changes that impact you are directly related to your decision whether you should itemize. There are a number of factors that will impact this decision. Ultimately, taxpayers should work with their team of advisors to determine whether itemizing is the right choice.


For tax payers who have paid off their mortgages, their largest itemized deductions might be charitable donations. In those cases, charitable donations may not exceed the new standard deduction, which would effectively make the donations lose their tax deductibility.


One strategy that allows individuals to continue to donate and receive tax benefits is to "bunch" donations to charities in specific years, while limiting donations in other years. When individual taxpayers contribute by bunching donations, they combine multiple years of "normal" annual charitable contributions into a single year. In the bunch years, the relatively large charitable contributions, in combination with other itemized deductions that cannot be timed this way — generally, mortgage interest and SALT taxes — will increase the likelihood of exceeding the standard deduction and thus provide the taxpayers with additional tax savings.

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