Posted in Triplett & Carothers on February 2, 2023
With tax time coming, you will need to ask yourself: Do I itemize my deductions or do I accept the standard deduction? In brief, the standard deduction lets you lower your income by a flat rate. It makes the math easy and you don’t have to work your way through piles of records. However, you may be entitled to deductions beyond the standard, so you’ll save more money by itemizing. In virtually all situations, the IRS lets you choose the method that saves you the most money.
To help, the IRS has recently published guidance to help you understand the differences and made the right choice.
Going With the Standard Deduction
The standard deduction amount increases slightly every year, says the IRS, and the amount depends on the taxpayer’s filing status. In general, these are the current standard deduction amounts:
- Single or married filing separately: $12,950
- Married filing jointly or qualifying surviving spouse: $25,900
- Head of household: $19,400
There are exceptions. For example, 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. In certain special circumstances, you may not be allowed to take the standard deduction. For example, if one spouse itemizes on a separate return, both must itemize.
Deciding to Itemize Deductions
Taxpayers who choose to itemize deductions have additional paperwork: Schedule A (Form 1040), Itemized Deductions. Here are a few of the itemized deductions that taxpayers may claim:
- 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, however. Overall, itemization can get complicated quickly and you must be able to document your expenses. Be sure to discuss your particular situation with a qualified tax professional.