Standard vs Itemized Deductions

Deductions Can Reduce
The Amount Of Tax Owed.

Do you know if you should file your tax return using the standard deduction or itemize your deductions? It is a good idea to find out. Deductions reduce the amount of taxable income when filing a federal income tax return. In other words, deductions can reduce the amount of tax you owe.

As an individual taxpayer, you should understand you have a choice of either taking a standard deduction or itemizing your deductions. You can use the method that gives you the lower tax. Due to tax law changes in the last couple of years, people who itemized in the past might not want to continue to do so. As a result, it is important to look into which deduction to take.

Here are some details about the two methods to help you understand which one you should use:

Standard Deduction

The standard deduction amount adjusts every year and can vary by filing status. The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether another taxpayer can claim you as a dependent. If you are age 65 or older on the last day of the year and don’t itemize deductions, you are entitled to a higher standard deduction.

You cannot use the standard deduction if:

You are a married individual filing as married filing separately and your spouse itemizes deductions.
You are an individual who files a tax return for a period of less than 12 months.
- This could be due to a change in your annual accounting period.
You are an individual who was a nonresident alien or a dual-status alien during the year.
- However, nonresident aliens who are married to a U.S. citizen or resident alien can take the standard deduction in certain situations.

Itemized Deductions

You may need to itemize deductions because you can’t use the standard deduction. You may also itemize deductions when this amount is greater than your standard deduction.

Taxpayers who itemize file Schedule A, Form 1040, Itemized Deductions or Form 1040-SR, U.S. Tax Return for Seniors.

You may benefit by itemizing deductions for things that include:

State and local income or sales taxes
Real estate and personal property taxes
Mortgage interest
Mortgage insurance premiums
Personal casualty and theft losses from a federally declared disaster
Donations to a qualified charity
Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income

Individual itemized deductions may be limited. Your tax professional can help determine what limitations may apply.