Why is standard deduction less in 2010

Mazur, and Eric Toder. Skip to main content. Tax System. How does the federal government spend its money? What is the breakdown of revenues among federal, state, and local governments? How do US taxes compare internationally? Federal Budget Process How does the federal budget process work? What is the history of the federal budget process? What is the schedule for the federal budget process?

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What did the American Taxpayer Relief Act of do? How did the Tax Cuts and Jobs Act change personal taxes? How did the Tax Cuts and Jobs Act change business taxes? Key Elements of the U. What are itemized deductions and who claims them? How did the TCJA change the standard deduction and itemized deductions?

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What is the difference between refundable and nonrefundable credits? Can poor families benefit from the child tax credit? Why do low-income families use tax preparers? How does the earned income tax credit affect poor families? Those families are also unable to give significant amounts to charity, and they do not tend to make large, deductible state income tax payments. The regressive nature of itemized deductions is amplified by the fact that under an income tax with graduated rates where the marginal tax rate rises as income rises , any type of tax deduction will tend to provide a larger benefit to the best-off families.

But if the second family is much wealthier and pays at the Since the vast majority of states allowing itemized deductions also use a system of graduated tax rates, this upside-down effect is common at the state level as well. State Treatment of Itemized Deductions. Thirty-one states and the District of Columbia DC allow itemized deductions patterned after federal rules Figure 1.

Seventeen states closely follow federal guidelines for itemized deductions with the exception of the federal deduction for state income taxes paid, which most states have sensibly chosen to disallow. Eleven other states and DC use the same federal guidelines, but impose their own limits on some or all of these deductions See Figure 2 for more detail on these states. Just three states Alabama, Arkansas, and South Carolina offer itemized deductions without any kind of limit or phase-down.

By contrast, ten states with broad-based income taxes do not allow any of these itemized deductions, opting instead to establish their own rules for determining taxable income that may include deductions for various expenses but are not based on the federal deduction structure and do not restrict those deductions to itemizers.

Options for Itemized Deduction Reform. In recent years, lawmakers in a number of states have ratified bold reforms that phase down or even repeal itemized deductions. The outright repeal of itemized deductions in Rhode Island in was the most significant of those efforts thus far. Most recently, Kansas, Maine, North Carolina, and Vermont enacted changes to reduce the value of itemized deductions for their best-off taxpayers. Options for itemized deduction reform include:.

Middle- and low-income families can be held harmless under such a change by simultaneously increasing the basic standard deduction available to all families. This was the approach taken in Rhode Island in States can pare back deductions for the best-off taxpayers by limiting the total amount of itemized deductions that can be claimed. Maine, North Carolina, and Vermont have implemented caps in the past few years. Kansas and North Carolina have recently reduced the number of available itemized deductions to just three or four of the major federal deductions.

If so, the tax bill won't let you deduct the cost of your move. Currently, you can deduct reasonable moving expenses — exclusive of meals — if your new workplace is at least 50 miles further from your old home compared with where your old job was. Workers who are relocating are also subject to a time test: Generally, you must work full time for at least 39 weeks during the first 12 months after you've arrived at your new location. The suspension of the moving expense deduction kicks in for the tax year and expires at the end of Under current law, alimony is deductible to the spouse making payments and is included as income to the recipient.

In the new bill, however, these payments are no longer deductible for the payor. Nor are the payments included in the recipient's gross income. Instead, the money used for alimony will be taxed at the payor's rates. A study by the Treasury Inspector General for Tax Administration revealed that about half of the filings with an alimony deduction in had a mismatch between the income received and the deduction claimed. Skip Navigation. Key Points.