Which one should you choose?
Most taxpayers have a choice of either taking the standard deduction or itemizing their deductions. The standard deduction may be quicker and easier, but itemizing deductions may lower taxes more in some situations. It’s important to look into which deduction method best fits you.
New This Year
Following tax law changes, cash donations of up to $300 made by December 31, 2020, are deductible without having to itemize when you file a 2020 tax return.
Here are some details about the two methods to help you decide which deduction to take:
The standard deduction is an amount that reduces taxable income. The 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 benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions. The Interactive Tax Assistant, How Much Is My Standard Deduction? on IRS.gov is a helpful tool in determining the amount of your standard deduction or if you should itemize your deductions.
You may itemize deductions because that amount is higher than your standard deduction, which will result in less tax owed or a larger refund. In some cases, you are not allowed to use the standard deduction.
You may benefit by itemizing deductions if any of the following apply to your tax situation:
- You had large uninsured medical and dental expenses
- You paid interest and taxes on your home
- You had large, uninsured casualty or theft losses
- You made large contributions to qualified charities
Individual itemized deductions may be limited. Schedule A, Form 1040, Itemized Deductions can help determine what limitations may apply.
A Final Note
Be sure to gather all receipts for any itemized deductions you plan to claim. Feel free to contact your local tax professional if you have questions about which deduction method is best for your tax situation.
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