How the Tax Cuts and Jobs Act Changed the Distribution of Itemized Deductions

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced significant changes to itemized deductions and the standard deduction, impacting taxpayers across income levels. This study utilizes data from the Statistics of Income to examine changes in tax progressivity and vertical tax equity between 2017 and 2020. The analysis finds that higher-income earners retained a considerably greater benefit from itemizing under the TCJA, indicating a decrease in progressivity post-2017. These results suggest a widening disparity in the tax benefit distribution of itemized deductions, as lower-income groups benefited less from itemizing. The study's insights provide a basis for policymakers as they consider future reforms ahead of the TCJA's scheduled sunset in 2025.