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One of the significant changes to the federal tax law for 2018 is the increase in the standard deduction to $24,000 for couples filing jointly, and $12,000 for individuals. This change, and others, will likely encourage many more people to use the standard deduction instead of itemizing.

Other changes to the tax code will also impact taxpayer decisions. For example, starting in 2018, there will be a cap of $10,000 on the deductible amount of state and local income and property taxes, known as SALT. This limit is per tax return, not per person.

As a result, many couples who itemized in prior years will no longer have sufficient deductions to do so. For example, a couple that is eligible for the $10,000 deduction will need an additional $14,000 in deductions for charity, mortgage interest, medical expenses and so forth in order for itemizing to be worthwhile.

The bottom line is that many couples will be using the standard deduction in 2018 who, in the past, would have itemized. Here are things such couples should consider, since without itemizing, they won’t be getting the usual tax break on charity and interest payments.

Charity strategy

Individuals who are 70½, and who are withdrawing funds from their traditional IRAs because of required minimum distributions (RMDs), should make any charitable contributions directly from their trustee in order to minimize their income taxes, assuming they are taking the standard deduction.

For example, if you donate $1,000 to a qualified charity, and your marginal tax bracket is 25 percent, you would save $250 by using this approach (since it reduces your reportable income) rather than by making the contribution directly (which you can’t deduct).

Singles will find it easier to itemize, because if they had a deduction of $10,000 for income and property taxes, they would only need an additional $2,000 in deductions in order to make it worth itemizing.

Mortgage and housing decisions

Some couples with mortgage debt should determine whether it pays for them to use the standard deduction and re-pay some of their outstanding debt, rather than continuing to pay interest that they won’t be able to deduct since they aren’t itemizing.

This decision should be based on the interest rate they are paying for their mortgage vs. the after-tax return they are receiving on their investments.

If they find that the after-tax return is less than the rate of interest they are paying, they should consider re-paying some or all of the mortgage debt.

However, they should also take liquidity into consideration. It would not be prudent to leave themselves with insufficient current assets that would be needed in a financial emergency.

The Federal Reserve has repeatedly raised interest rates. As a result, you can now get higher rates of return on various maturities of CDs, money market instruments, Treasury bills and Treasury bonds. Shop around for the best rates, and then determine whether it makes sense to re-pay your outstanding mortgage.

Other tax changes

Staring in 2018, home buyers may deduct interest on debt up to $750,000 for up to two homes owned. However, there is a “grandfathered” exception. If you owned these homes prior to the tax law changes went into effect, you still can deduct interest up to $1 million of debt.

There also has been a change in the tax laws regarding home-equity loans. You can deduct interest on home equity debt only when the debt is used to buy, build or improve the home. There is no deduction when you use the loan for other purposes.

Changes in the tax laws effective for 2018 can have a significant impact on the deductibility of interest you are paying for outstanding debt. Don’t hesitate to sit down with your tax preparer to determine what the impact will be for 2018 and beyond.

If you don’t think your tax preparer has the expertise you need, consider using a more experienced tax professional, such as an enrolled agent or CPA. Your objective should be to maximize your after-tax income.

© 2018 Elliot Raphaelson. Distributed by Tribune Content Agency, LLC.