Tax Basics: Standard Deduction or Itemize your Deductions?

We’re wrapping up March with one final tax article about deductions, specifically the difference between taking the “standard deduction” and “itemizing your deductions”. You can only pick one when you do your taxes, which is better for you? This year, the answer may be different because of the 2017 Tax Cuts and Jobs Act and how it tried to simplify returns.

One of the simplifications was significantly increasing the amount of the standard deduction (almost doubling it from $6,350 to $12,000 for an individual filer), making it a better choice for most taxpayers when compared to itemizing. The standard deduction is a fixed amount that the IRS lets you deduct from your income (and therefore reducing what you owe in taxes) without providing any additional information. The amount you can deduct depends on your household/marital status and how you’re filing.

Itemizing your deductions, on the other hand, essentially means listing your individual deductions out on additional schedules. Some example deductions you would list include home mortgage interest, state and local taxes, real estate and property taxes, medical expenses and charitable donations. If your total itemized deductions exceed the standard deduction amount, you’ll want to itemize. If your itemized amount is less than the standard deduction, obviously, you’ll use the standard deduction.

Increasing the standard deduction wasn’t the only change that may impact your decision. Some of the most popular itemized deductions mentioned above had limits placed on them (mortgage interest deductions, state and local taxes, etc) and some are no longer deductible such as anything paid for on your home equity line of credit that weren’t used to improve your home (like paying tuition or buying a car). Read our full article about tax deductions here.

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