Choosing between the standard deduction and itemized deductions can affect how much of your income is subject to federal income tax. Understanding how each option works can help you avoid claiming a smaller deduction than you are entitled to receive.
The right choice depends on your filing status, age, deductible expenses, homeownership, charitable contributions, medical expenses, and overall tax situation.
What Is the Standard Deduction?
The standard deduction is a fixed amount that reduces your taxable income. You do not need to list or document individual deductible expenses to claim it.
The amount generally depends on your filing status. Certain taxpayers may also qualify for an additional standard deduction because of age or blindness.
Many taxpayers use the standard deduction because it:
- Is simple and straightforward to claim
- Does not require a detailed list of deductible expenses
- Usually requires less supporting documentation
- May exceed the taxpayer's total itemized deductions
| Single | $15,750 |
|---|---|
| Married Filing Separately | $15,750 |
| Married Filing Jointly | $31,500 |
| Qualifying Surviving Spouse | $31,500 |
| Head of Household | $23,625 |
Additional standard deduction amounts may apply when a taxpayer or spouse is age 65 or older or legally blind. The amount depends on filing status and how many qualifying conditions apply.
What Are Itemized Deductions?
Itemized deductions allow you to deduct certain qualifying expenses individually instead of claiming the standard deduction.
Itemizing generally requires more records and documentation, but it may result in a larger deduction when your qualifying expenses exceed the standard deduction available for your filing status.
Common itemized deductions may include:
- Qualified mortgage interest
- Eligible state and local taxes, subject to applicable limits
- Qualified charitable contributions
- Medical and dental expenses above the applicable threshold
- Certain federally declared disaster losses, when permitted
Standard Deduction vs. Itemized Deductions
Standard Deduction
- Fixed amount based primarily on filing status
- Usually easier to claim
- Requires less recordkeeping
- Often useful when deductible expenses are limited
Itemized Deductions
- Based on actual qualifying expenses
- Requires receipts and supporting records
- May require additional tax forms
- Can provide greater savings when expenses are substantial
Best Method
- Compare both allowable deduction amounts
- Use accurate supporting information
- Consider federal and state tax differences
- Select the legally available method producing the best result
When Might Itemizing Be Better?
Itemizing may be beneficial when your total qualifying expenses are greater than your available standard deduction.
You may be more likely to benefit from itemizing when you:
- Paid significant mortgage interest
- Made substantial charitable contributions
- Had large unreimbursed medical or dental expenses
- Paid substantial deductible state and local taxes
- Experienced a qualifying federally declared disaster loss
When Is the Standard Deduction Usually Better?
The standard deduction is generally better when your qualifying itemized expenses do not exceed the standard deduction for your filing status.
It may also be preferable when you want a simpler return and do not have sufficient records to support itemized deductions.
How Should You Decide?
Add your allowable itemized deductions and compare the total with the standard deduction available for your filing status.
The larger allowable deduction will generally produce the lower taxable income. Other tax rules, income limitations, filing-status requirements, and state tax considerations may also affect the final result.
Tax software may compare both options automatically, but the result is only as accurate as the information entered. Missing mortgage interest, charitable contributions, medical expenses, or tax payments could cause the comparison to be incorrect.
Can Married Couples Choose Different Methods?
In most cases, married taxpayers filing separate federal returns must use the same deduction method. When one spouse itemizes, the other spouse generally must itemize as well, even when the second spouse has few deductible expenses.
Keep Documentation for Your Deductions
Taxpayers who itemize should retain receipts, charitable contribution acknowledgments, mortgage interest statements, property-tax records, medical bills, and other supporting documents.
Even taxpayers who claim the standard deduction should retain their tax records and documents supporting income, credits, and other items reported on the return.
Not sure which deduction is better?
PUBLIC TAX, CORP can compare both methods, review your supporting documents, and prepare your return using the deduction appropriate for your tax situation.