West Virginia Should Reinstate the Standard Deduction

Did you know that West Virginia’s tax filings don’t have a standard deduction? Reinstating it as part of West Virginia’s income taxes could be a step in the right direction to provide for smart, simplified tax policy for Mountaineers.

What is the standard deduction?

A standard deduction is a fixed amount, set by the government, to reduce a taxpayer’s taxable income. However, it’s worth noting, the amount may adjust each year and can vary based on your filing status. Still, the idea is the same: the government provides a fixed deduction to report on filed taxes.

The standard deduction allows taxpayers to take a deduction even if there are no expenses that qualify for itemized deductions. It also provides some relief from keeping records and receipts of expenses in the case of an IRS audit.

 

How is this different from an itemized deduction?

Itemized deductions, in contrast to standard deductions, allow individuals to reduce their taxable income through designated, eligible expenses including state and local taxes, charitable contributions, and mortgage interest. This tax filing is more commonly used by high-income taxpayers. This is because their deductions may total more than the standard deduction’s allotted amount.

 

Why is a standard deduction good?

 Tax code complexity can create real pains for taxpayers. According to a report from Tax Foundation, individuals spent 2.6 billion hours complying with IRS tax filing requirements in 2016 alone.

The Trump Administration’s Tax Cuts and Jobs Act of 2017 (TCJA) simplified the tax code. It increased the standard deduction which has resulted in an estimated 30% fewer tax filers itemizing their tax deductions. Upon its passage, the TCJA reduced tax paying complications for nearly 29 million more households by ensuring an easier tax filing process (and reduced the time it will take to file a return by 4-7%).

In order to ease the burden on West Virginia taxpayers, it’s essential we continue to revisit ways to simplify the tax code.

 

Jessica Dobrinsky is a Policy Analyst for the Cardinal Institute for West Virginia Policy.