The standard deduction is a flat amount that you can subtract from your income, while itemized deductions are specific expenses that you can deduct, but you must keep track of your expenses and provide documentation. The choice between claiming the standard deduction and itemizing your deductions will depend on which method gives you the greatest tax benefit.
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What is a standard deduction?
A standard tax deduction is a flat amount of money that the government allows you to subtract from your taxable income to lower your tax liability. The amount is determined by the IRS every year, adjusted for inflation. The standard deduction is an alternative to itemizing your deductions, and you can claim it if you don’t have enough eligible expenses to itemize or if you choose not to itemize.
For the 2022 tax year, the standard deduction amounts are as follows:
- For single taxpayers and married taxpayers filing separately, the standard deduction is $12,950.
- For married taxpayers filing jointly, the standard deduction is $25,900.
- For heads of household, the standard deduction is $19,350.
- If you’re blind or over 65 years old, you can add an additional $1,400 on top of your standard deduction. If you’re also unmarried, you can add $1,750 instead of $1,400.
For the 2023 tax year, the standard deduction amounts are as follows:
- For single taxpayers and married taxpayers filing separately, the standard deduction is $13,850.
- For married taxpayers filing jointly, the standard deduction is $27,700.
- For heads of household, the standard deduction is $20,800.
- If you’re blind or over 65 years old, you can add an additional $1,500 on top of your standard deduction. If you’re also unmarried, you can add $1,850 instead of $1,500.
If you choose to take standard deductions, you don’t need to provide any kind of proof of expenses (like invoices or copies of receipts) when filing your taxes. It’s an automatic, no-questions-asked deduction that any individual tax filer can choose to take.
What is an itemized deduction?
Rather than taking the standard deduction set by the IRS, some people may find that their deductions are higher when they claim individual itemized deductions for their eligible expenses incurred throughout the tax year. Unlike standard deductions, every individual will have a different deduction amounts since their
Itemized deductions include things like:
- Medical and dental expenses
- State and local income, sales, and property taxes
- Mortgage interest and investment interest
- Charitable contributions
- Casualty and theft losses
If you choose to itemize your deductions, you’ll need to keep track of your eligible expenses and report them on your tax return. You’ll need to provide documentation, such as receipts and statements, to prove that you incurred the expense and that it was eligible.
Not everyone will benefit from itemizing their deductions. If your eligible expenses are less than the standard deduction amount, it’s usually better to take the standard deduction because it saves you time and effort.
Standard deduction vs itemized deduction: key differences
It’s completely up to you whether you choose to take a standard deduction or itemized deduction. You can run the numbers for each type and see which one is higher. Keep in mind, though, that itemized deductions require proof and documentation of expenses incurred.
The main differences between a standard deduction and an itemized deduction are:
Eligibility
Anyone who files a tax return can claim a standard deduction, while only taxpayers who have eligible expenses that exceed the standard deduction amount can claim itemized deductions.
Amount
The standard deduction is a fixed amount set by the government, based on your filing status and other factors, while the amount of itemized deductions you can claim is based on the eligible expenses you incurred during the year.
Eligible expenses
The standard deduction is a flat amount that you can subtract from your income, while itemized deductions are specific expenses that are eligible for deduction, such as medical expenses, state and local taxes, mortgage interest, and charitable donations.
Documentation
To claim the standard deduction, you don’t need to provide any documentation. However, to claim itemized deductions, you must keep records of your eligible expenses and provide documentation to prove that the expenses were incurred and that they are eligible.
Time and effort
Claiming the standard deduction is generally easier and less time-consuming than itemizing your deductions because you don’t have to keep track of your eligible expenses or provide documentation.
When to use itemized deductions over standard deductions
Each tax year, you should run the numbers on both standard and itemized deductions, and only use itemized deductions if it’s higher than the set standard deductions. Itemized deductions take more time (since you have to itemize each deduction) and requires more administration maintenance (since you have to keep records of your expenses throughout the year). Taking the standard deduction is much simpler; it’s a no questions asked deduction and you don’t need to keep a record of your expenses.