Standard Deduction or Itemized Deductions

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Before filing your taxes, consider whether you should itemize your deductions or take the standard deduction.

The standard deduction reduces your income by a certain amount, while itemized deductions consist of a list of permissible charges. You can claim whichever is the most advantageous.

Standard Deduction

If you make the standard deduction claim, the IRS bases the standard deduction on your filing status and assigns a fixed amount to it. The standard deduction amounts for 2022 tax returns (filed in 2023) are:

  • $12,950 for single taxpayers and married individuals filing separate returns
  • $19,400 for heads of household
  • $25,900 for married couples filing jointly or qualifying surviving spouse

Itemized Deductions

If you itemize your deductions, you can claim amounts you actually spend on certain deductible expenses such as:

  • unreimbursed medical and dental expenses that exceed 7.5% of Adjusted Gross Income
  • allowable taxes up to $10,000, for example:
    • property and some personal taxes
    • state and local income taxes
    • foreign income tax
  • mortgage interest (reported by bank to you on form 1098):
    • has to be for main or second home
    • the taxpayer main or second home must secure the debt generating the interest
    • the debt proceeds must be used to buy, build, or substantially improve main home or second home
    • the accumulated debt is limited to $750,000
  • personal casualty and theft losses from a federally declared disaster area
  • donations to a qualified charity (up to 60% of Adjusted Gross Income)

 If you choose to itemize, you must include Schedule A with your tax return and list all of these expenses on it.

Advantages on choosing the standard deduction

  • IRS does not require to keep records of your expenses or keep track of supporting documents such as bank statements, medical bills, tax forms, etc.
  • The standard deduction has increased significantly compared to a few years ago and the IRS updates this amount for inflation every year
  • Taxpayers aged 65 or older or blind can claim higher standard deductions:
    • the deduction is increased by $1,750 for single taxpayer or head of household
    • $1,400 for married filing jointly
    • if you are both 65 and blind, the additional deduction is doubled

Disadvantages on choosing the standard deduction

  • The IRS does not allow you to use the standard deduction if you are married filing separately and your spouse uses the itemized deductions because you and your spouse must be on the same page when choosing the deductions
  • In addition, if someone can claim you as a dependent, your standard deduction will be lower
  • You could pay more in taxes when you choose to take the standard deduction instead of the itemized deductions, if your itemized deductions amount exceeds the standard deduction amount

Advantages on choosing the itemized deductions

  • You could save some money: if your itemized deductions are higher than the standard deduction, your tax bill will be lower
  • Your tax bill will change if you itemize even slightly more deductions than the standard deduction:
    • let’s suppose you are filling single, and you have $14,450 in itemized deductions
    • although it is $1,500 more than the standard deduction, which is $12,950 for single taxpayers, you won’t actually pay $1,500 les in taxes
    • always keep in mind that the deductions are deducted from your taxable income
    • and, in this case, itemizing deductions resulted in a $1,500 reduction in your taxable income, not in your tax due

Disadvantages on choosing the itemized deductions

  • You have to keep receipts, bank statements and other documentation
    • for example, for cash charitable contributions IRS requires you to have:
    • if the contribution is less than $250:
      • bank records such as:
        • canceled check
        • bank statement
        • credit card statement
      • a document showing: date, amount of the contribution, and the organization name
      • receipt with date, contribution amount, and organization name
      • payroll record, if made by payroll deduction
    • if the contribution is $250 or more:
      • same as above, plus either payroll record or a written acknowledgement from the organization showing:
        • date and amount of contribution
        • if any goods or services, other than intangible religious benefits were provided by the organization and a good faith estimate of their value
        • a statement that the only benefit the taxpayer received was an intangible religious benefit (if applicable)
  • The filing is more challenging because you will have to file a Schedule A and possibly other tax form

The tax filing deadline of April 18, 2023, is quickly coming during tax season 2023. The sooner you begin to prepare for the tax season, the better.

We recommend you keep your documents, such as interest statements, bank statements, receipts, 1099 forms, W-2 forms, and other documents in a secure location and properly organized, preferably in electronic format. For example, if you scan a receipt you can save the pdf file with a name such as
year/month/date/, vendor name and the amount. And you can create separate folders for each year.

If you need help with your federal or state taxes, give us a call or schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.