Standard Deduction & Itemized Deduction Overview
If you have ever managed your own taxes, or had a professional handle them for you, you may be wondering what standard deductions and itemized deductions are. In this article, the TaxProsOnline team will cover everything you need to know about standard deductions vs itemized deductions.
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Standard Deductions
The standard deduction is a flat-dollar tax break that reduces your taxable income, with the amount based on your filing status (single, married, etc.). It’s essentially a tax break that you can take without having to track expenses or keep receipts.
The standard deduction amount increases slightly every year. The standard deduction amount depends on the taxpayer’s filing status, whether they are 65 or older or blind, and whether another taxpayer can claim them as a dependent. Taxpayers who are age 65 or older on the last day of the year and don’t itemize deductions are entitled to a higher standard deduction.
Most filers who use Form 1040 can find their standard deduction on the first page of the form. According to the instructions for Form 1040, not all taxpayers can take a standard deduction, including:
- A married individual filing as married filing separately whose spouse itemizes deductions – if one spouse itemizes on a separate return, both must itemize.
- An individual who files a tax return for a period of less than 12 months. This is uncommon and could be due to a change in their annual accounting period.
- An individual who was a nonresident alien or a dual-status alien during the year. Nonresident aliens who are married to a U.S. citizen or resident alien, however, can take the standard deduction in certain situations.
Related: When are Taxes Due? Tax Deadlines You Need to Know
Itemized Deductions
Itemized deductions are specific expenses you can subtract from your income – things like mortgage interest, charitable donations, state and local taxes, and medical expenses above a certain threshold.
You would choose to itemize only if all these deductions added together exceed your standard deduction amount. Most taxpayers find the standard deduction gives them a better tax break, but those with large mortgages, significant charitable giving, or high state taxes might benefit more from itemizing.
Taxpayers who choose to itemize deductions may do so by filing Schedule A (Form 1040), Itemized Deductions. Itemized deductions that taxpayers may claim can include:
- State and local income or sales taxes.
- Real estate and personal property taxes.
- Home mortgage interest.
- Personal casualty and theft losses from a federally declared disaster.
- Gifts to a qualified charity.
- Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income.
Some itemized deductions, such as the deduction for taxes, may be limited. Taxpayers can review the instructions for Schedule A (Form 1040) for more information on limitations.
Related: How to Prepare for Tax Season: A Step-by-Step Guide
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Please contact us today to have us help with your personal taxes. To see all tax services we provide, please take a look at our tax information page here.