Understanding Deductions: Standard vs. Itemized
Deductions play a key role in reducing your taxable income, which in turn lowers your tax liability. The IRS allows taxpayers to choose between the standard deduction or itemizing deductions, depending on their individual circumstances. Here's what you need to know about each option and how they impact your taxes.
The Standard Deduction
The standard deduction is a fixed amount based on your filing status:
Single
Married Filing Jointly
Married Filing Separately
Head of Household
Qualifying Surviving Spouse
Each year, the IRS adjusts the standard deduction for inflation, ensuring it reflects current economic conditions. Taxpayers who are 65 or older or blind may qualify for an additional deduction to further reduce taxable income.
Who Cannot Take the Standard Deduction?
Certain individuals are ineligible for the standard deduction, including:
Married individuals filing separately, if their spouse itemizes deductions.
Taxpayers filing a return for less than 12 months due to a change in their accounting period.
Nonresident aliens or dual-status aliens (unless married to a U.S. citizen or resident and opting to be treated as a U.S. resident).
Estates, trusts, common trust funds, and partnerships.
For more details, see Publication 519: U.S. Tax Guide for Aliens.
Itemized Deductions
If your allowable expenses exceed the standard deduction, itemizing may save you more money. Itemized deductions are reported on Schedule A and can include:
State and local income or sales taxes
Real property and personal property taxes
Mortgage interest
Charitable contributions
Medical and dental expenses (subject to limitations)
Disaster-related losses
Taxpayers who are claimed as dependents or have limitations on the standard deduction may also benefit from itemizing.
Choosing Between Standard and Itemized Deductions
The decision to itemize or take the standard deduction depends on which option results in a greater reduction in taxable income. You must itemize if:
Your total itemized deductions exceed the standard deduction.
You’re ineligible for the standard deduction.
By understanding the differences between standard and itemized deductions, you can make informed decisions to maximize your tax benefits. For personalized guidance on deductions and other tax strategies, The Tax Doctor is here to help.
Source: IRS Topic No. 501 - Standard Deduction and Itemized Deductions
