Understanding Tax Deductions: Standard or Itemized?

This week’s entry in our tax series is about deductions, specifically the difference between taking the “standard deduction” and “itemizing your deductions”. When you do your taxes you have to choose one or the other; which is better for you? According to the IRS, almost 90% of returns last year opted for the standard deduction, largely due to a big change in the 2017 Tax Cuts and Jobs Act.

The change significantly increased the amount of the standard deduction 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 (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 include home mortgage interest, 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.   

Read our full article about tax deductions here.