Claiming the Standard Deduction Vs. Itemized Deductions: What’s the Difference?

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A deduction is an amount you can subtract from your taxable income to reduce the overall amount that is subject to taxation. There are two routes to take when filing your taxes: taking a standard deduction or itemizing deductions. Understanding them can help maximize your potential refund or minimize what you owe the IRS.

Here is a breakdown of the differences between the standard deduction vs. itemized deductions and what they mean for taxpayers.

The Standard Deduction

The standard deduction is a single deduction with a specific dollar amount taxpayers can opt to deduct, reducing their taxable income. In general, the standard deduction is adjusted each year for inflation. Also, the amount varies according to your filing status, age, health conditions, and whether another taxpayer can claim you as a dependent. However, it is one deduction with a set dollar amount.

Benefits

• Makes it easier to file your taxes

• Gives you a tax deduction even if you don’t have any expenses that qualify for an itemized deduction

• Eliminates the need to keep records and receipts of all your expenses

Itemized Deductions

When you itemize deductions, you are claiming many deductions you qualify for instead of taking one deduction. There are many different deductions that you may qualify for. Some of the most common include those for medical expenses, property taxes, mortgage interest, and charitable contributions.

Benefits

• May add up to a larger total deduction than the standard deduction

Which Should I Take?

At the end of the day, you have to decide whether it’s worth the effort to find out if taking itemized deductions would add up to more than the standard deduction; otherwise, simply taking the standard deduction would save you some time and effort.

Have questions about the two kinds of deductions or how to decide what’s right for your unique tax situation? Our tax planning and prep experts are here to help. Contact us.