Taxpayers should understand the difference between a standard and itemized deduction before deciding which one to place on their tax return. Deductions can help an individual reduce the amount of taxable income when filing a federal income tax return.
Individuals should review both methods and see which one will help reduce their taxes. Because of tax law changes within the last couple of years, individuals who itemized in the past may need to reconsider if they want to continue to do so.
Optima Tax Relief reviews both deductions to help individuals understand which one they should use.
Standard deductions
The standard deduction amount adjusts every year and is based off an individual and couple’s filing status. The standard deduction also depends on whether an individual is 65 or older, blind, or if they have another taxpayer that they can claim as a dependent. Taxpayers who are age 65 or older on the last day of the year and do not itemize deductions are entitled to a higher standard deduction.
Most filers who use Form 1040 or Form 1040-SR, U.S. Tax Return for Seniors, can find their standard deduction on the first page of the form.
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Individuals who do not qualify standard deduction include:
- A married individual filing as married filing separately whose spouse itemizes deductions.
- An individual who files a tax return for a period of less than 12 months. This could be due to a change in their annual accounting period.
- An individual who was a nonresident alien or a dual-status alien during the year. However, nonresident aliens who are married to a U.S. citizen or resident alien can take the standard deduction in certain situations.
Itemized deductions
If you are unable to use the standard deduction, you may want to consider using the itemized deduction. Taxpayers who itemize file Schedule A, Form 1040, Itemized Deductions or Form 1040-SR, U.S. Tax Return for Seniors.
A taxpayer may benefit by itemizing deductions for things that include:
- State and local income or sales taxes.
- Real estate and personal property taxes.
- Mortgage interest.
- Mortgage insurance premiums.
- Personal casualty and theft losses from a federally declared disaster.
- Donations to a qualified charity.
- Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income.
Individual itemized deductions may be limited. Schedule A, Form 1040 Instructions can help determine what limitations may apply.
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