Danielle, one of your tax clients, has reached out regarding her itemized deductions. She pays on average $4,000 in property taxes on her personal residence per year and contributes $5,000 to her favorite Sec. 501 (c) (3) charitable organizations per year. Danielle realized that with the new increased standard deduction amount she will not be able to itemize on her 2019 return. She is frustrated that she will not be receiving any tax benefit from her expenditures. What advice would you give Danielle moving forward? How can she receive a tax benefit from her expenditures?

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Damian Barajas

30 August, 04:08

Danielle, one of your tax clients, has reached out regarding her itemized deductions. She pays on average $4,000 in property taxes on her personal residence per year and contributes $5,000 to her favorite Sec. 501 (c) (3) charitable organizations per year. Danielle realized that with the new increased standard deduction amount she will not be able to itemize on her 2019 return. She is frustrated that she will not be receiving any tax benefit from her expenditures. What advice would you give Danielle moving forward? How can she receive a tax benefit from her expenditures?

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Carolyn Browning · Answer 1

You can basically tell Danielle that before her tax deductions only reduced her taxable income by $9,000 per year, but now the new standard deduction is $12,200 per person. With the new standard deduction her taxes are being reduced by $3,200 more than before.

Since charitable contributions are below the line deductions, it is not logical to itemize her deductions. Above the line deductions are health insurance, retirement plans, student loans, etc., and unless she also contributes to those, then her deductions are over until 2026.

Maybe if she has some mortgage interest she can add to her deductions they could add more than $12,200 (or $12,400 for 2020), or medical expenses. If not, it is simply not worth it, she will lose money.