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Celebrating standard tax deductions as we turn our clocks back to Standard Time

The_persistence_of_memory_1931_salvador_dali_wikipedia
"The Persistence of Memory" by Salvador Dalí (Oil on canvas, 1931) © Salvador Dalí, Gala-Salvador Dalí Foundation/Artists Rights Society (ARS), New York. Photograph taken in 2004. (Image  from About.com, fair use, via Wikipedia)

It's that time of year again, literally. At 2 a.m. today (Sunday, Nov. 4, 2018), most of us said goodbye to Daylight Saving Time and hello to the return of Standard Time. 

OK, maybe most of us weren't up in the wee hours to actually say goodbye and hello to our clocks. But we're dealing now with the timepiece trickery. A lot of us (me!) will suffer a sort of jet lag as our body clocks adjust to the new time and earlier arrival of sunsets.

All this time shifting can be confusing, but in the tax world, standard tends to be much simpler.

In conjunction with today's return of Standard Time (and the hour gained that earns this week's By the Numbers honor), here's a look at a couple of tax standards, the standard deduction amounts and the standard mileage deduction, and how the new tax law affects them.

Standard deduction double-take: Most taxpayers claim the standard deduction amount each year instead of itemizing their deductible expenses. It's easier thank itemizing because you don't have to track expenses, hang onto receipts or meet any income or spending thresholds.

Even more filers are expected to claim the standard deduction, which is a set amount based on your filing status, next tax season thanks to the Tax Cuts and Jobs Act's (TCJA) changes.

That tax reform bill, which was enacted at the end of 2017 and, for the most part, took full effect for the 2018 tax year, made the most collective changes to the Internal Revenue Code since the historic 1986 Tax Reform Act.

Those changes include one the law's biggest selling points: the almost doubling of standard deduction amounts. For 2018 tax return filings, those precise standard deduction amounts are:

  • Single = $12,000
  • Head of Household = $18,000
  • Married Filing Jointly = $24,000
  • Qualifying Widow/Widower (Surviving Spouse) = $24,000
  • Married Filing Separately = $12,000

Older or visually disabled filers still get a bump in the standard deduction. For the 2018 tax year, that's $1,300 for those age 65 or older or blind per the IRS definition, which is not totally without sight. The additional standard deduction amount is increased to $1,600 if the individual is also unmarried and not a surviving spouse.

Just check the form: As noted earlier, one of the most appealing things about the standard deduction is that it's easy. No calculations, no record-keeping hassles. All you have to do is look at your tax return.

For 2018, that's one tax return, the plain ol' Form 1040. The IRS, in consultation with Congressional tax writers, are using the TCJA changes to shorten the old long 1040 and do away with the other two returns, the 1040A and 1040EZ.

That will mean some taxpayers will have more schedules to complete. But for folks with basic returns, things should be simpler.

One thing that didn't change was that the standard deduction amounts are still listed on the Form 1040. You don't even have to thumb through the form's instructions, if you're still inclined to use paper returns instead of tax software.

Form 2040 TCJA draft 2018 changes_page 2

As you can see on the image above of page 2 of the draft 2018 Form 1040, the standard deduction amounts are listed. The Internal Revenue Service says the new tax return might be tweaked a bit before filing season arrives, but those figures will stay.

Inflation alterations: The only changes that will come to these amounts is the annual inflation adjustment. This is the yearly bump up in the standard deductions if inflation data warrants.

The IRS usually releases inflation changes or lets us know amounts will hold steady in the coming tax year each November — last week it announced retirement plan 2019 cost-of-living increases — so the standard deduction and numerous other tax-related inflation changes should be made public any day now.

When that happens, I'll be posting them as part of my annual 10-part tax inflation series. You can get a preview of what to expect in my 2018 inflation figures post. Congress' late-year action on the TCJA necessitated the follow-up revised inflation changes post.

Measuring business mileage: One of those tax matters annually affected tangentially by inflation is how much you can deduct if you use your auto for various IRS-sanctioned tasks.

The most common mileage deduction is for folks who use their vehicles for business.

There's some bad tax reform news here if you're an employee who used to claim unreimbursed company business miles as an itemized miscellaneous expense on Schedule A. The new tax law eliminated this deduction.

However, if you work for yourself, this transportation write-off remains.

As the boss behind the wheel, you have two options on how to claim your work-related automotive expenses. You can write off all your actual work-related vehicle expenses or you can claim the standard mileage deduction.

Which is better? As with most things tax, the answer is "it depends." You can find the intricacies of both options and what you should consider before making a business mileage deduction decision in my earlier post on which auto expenses deduction method might cut your business tax bill more.

We're still waiting for the IRS to tell us how much that will be when we make business road trips in 2019, but for 2018 the standard mileage rate for business driving is 54.5 cents per mile.

Other miles count at tax time, too: You also can claim a standard mileage rate for driving done in connection with charitable services, as well as for moving (if you're a relocating member of the military) and getting to and from medical treatments.

Those standard mileage amounts for 2018 are 14 cents per mile and 18 cents per mile, respectively.

The standard business mileage rate, according to the IRS, is based on an annual study of the fixed and variable costs of operating an automobile. The medical and moving rates, on the other hand, are determined by looking at just the variable costs of operating a car.

The biggest fixed automotive cost is the vehicle's price. The biggest variable cost is gasoline.

The IRS usually announces any inflation changes to the business, medical and moving standard mileage rates at the end of November or in early December. Since inflation has been creeping up a bit, those amounts could increase somewhat for 2019.

As with the other annual tax inflation adjustments, when next year's official tax mileage word is out, I'll let you know.

But I can tell you right now that the amount for charity-related miles will stay at 14 cents per mile amount. That paltry deduction limit is set by Congress and not adjusted annually for inflation.

You also might find these items of interest: 

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