Deductions help reduce taxable income, which can lower the amount of taxes owed. Taxpayers can choose between taking a standard deduction or itemizing deductions, depending on which benefits them more.
Standard Deduction
The standard deduction is a fixed amount based on filing status:
Single
Married filing separately
Married filing jointly
Head of household
Qualifying surviving spouse
Taxpayers aged 65 or older and those who are legally blind may qualify for a higher standard deduction. This amount is adjusted yearly for inflation.
Who Cannot Take the Standard Deduction?
You cannot claim the standard deduction if:
Your spouse itemizes deductions and you file separately.
You file a tax return for less than 12 months due to a change in the accounting period.
You are a nonresident alien or dual-status alien, unless married to a U.S. citizen or resident and electing to be treated as a resident.
You are filing as an estate, trust, common trust fund, or partnership.
Itemized Deductions
If total itemized deductions exceed the standard deduction, it may be beneficial to itemize instead. Common itemized deductions include:
State and local taxes (income or sales tax)
Property taxes
Mortgage interest
Medical and dental expenses (subject to limits)
Charitable contributions
Disaster losses
Some taxpayers are required to itemize, especially if they are claimed as dependents or have specific deduction limits.
Choosing the Right Deduction
To determine which method saves the most money, taxpayers should compare their eligible itemized deductions to the standard deduction amount for their filing status.