Taxpayers who would have claimed the standard deduction would be unaffected by the change. As a result, all taxpayers who would otherwise itemize deductions would have to claim the standard deduction, which generally would be of less value to them. This option would eliminate all itemized deductions. Absent those legislated changes, the amount of itemized deductions was projected to grow slightly faster than income. As a result of temporary changes enacted by the 2017 tax act, the Congressional Budget Office projects that the number of itemizers will fall by more than 60 percent from 2017 to 2018 and the value of those itemized deductions will fall by about 35 percent. For instance, $10,000 in deductions reduces tax liability by $1,500 for someone in the 15 percent tax bracket and by $2,800 for someone in the 28 percent tax bracket. The change in taxes from itemized deductions depends on the taxpayer's marginal tax rate (the percentage of an additional dollar of income that is paid in taxes). Their itemized deductions totaled almost $1.3 trillion by comparison, if those taxpayers had claimed the standard deduction, their taxable income would have been $800 billion higher. In 2015, almost 45 million taxpayers itemized their deductions, according to the Internal Revenue Service. The net effect of those changes will be to increase the number of taxpayers who itemize and the amount of deductions they claim. And a provision that reduced the total value of certain itemized deductions by 3 percent of the amount by which a taxpayer's AGI exceeded a specified threshold will come back into effect. Additionally, several itemized deductions (such as the deductions for unreimbursed employee expenses and tax preparation fees) that were temporarily eliminated by the 2017 act will be reinstated. The limit on state and local taxes will be removed, and the limitation on mortgage interest will revert to the higher amount ($1.1 million) set by pre-2018 tax law. Several restrictions on deductions that were put in place by the act will no longer be in effect. The size of the standard deduction will be reduced by roughly 50 percent, making itemization a better choice for many taxpayers. Many tax rules relating to deductions will change in 2026, when most changes to the individual income tax system made by the 2017 tax act expire. (AGI includes income from all sources not specifically excluded by the tax code, minus certain deductions.) For some types of expenses (such as medical expenses), only the amount that exceeds a certain percentage of the taxpayer's adjusted gross income (AGI) can be deducted. For 2018, taxpayers cannot deduct more than $10,000 in state and local taxes, nor can they deduct home mortgage interest on loan amounts in excess of $750,000. The tax code imposes several limits on the amount of itemized deductions taxpayers can claim. (Tax expenditures resemble federal spending by providing financial assistance for specific activities, entities, or groups of people.) Most of the tax savings from itemized deductions constitute a "tax expenditure" by the federal government. (For 2018, that amount ranged from $12,000 for a single filer to $24,000 for a married couple filing jointly.) The fact that those expenses are deductible reduces the cost of incurring them, so, in effect, the itemized deductions serve as subsidies for undertaking deductible activities. Taxpayers benefit from itemizing when the value of their deductions exceeds the amount of the standard deduction. When preparing their income tax returns, taxpayers may choose either to take the standard deduction-which is a flat dollar amount-or to itemize and deduct certain expenses, such as state and local taxes, mortgage interest, charitable contributions, and some medical expenses.
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