The difference between the standard deduction and itemized deduction comes down to simple math. The standard deduction lowers your income by one fixed amount. On the other hand, itemized deductions are made up of a list of eligible expenses. You can claim whichever lowers your tax bill the most.
Read on to understand the difference between the standard deduction and itemized deductions. Your standard deduction varies according to your filing status. Secondly, you may want to know what is the standard deduction amounts are. They are:. On the other hand, the child tax credit doubled and applies to more families, which will push some returns in the other direction. The new law also eliminated a number of deductions taxpayers could take previously and changed some others.
Itemized deductions fall into a different category than above-the-line deductions, such as self-employment expenses and student loan interest. They are below-the-line deductions, or deductions from adjusted gross income AGI. When itemized deductions have been subtracted from your income, the remainder is your actual taxable income. Itemized deductions were created as a social-engineering tool by the government to provide economic incentives for taxpayers to do certain things, such as buy houses and make donations to charities.
Schedule A is broken down into several different sections that deal with each type of itemized deduction. The following is a brief overview of the scope and limits of each category of itemized deduction. This deduction is perhaps the most difficult—and financially painful for which one can qualify. However, the 7. Long-term care premiums are calculated slightly differently than medical expenses are.
There is a deduction limit based on your age, and the insurance must be "qualified. Homeowners can deduct the interest they pay on their mortgages and some home-equity debt. If the mortgage was originated before Dec. The higher limit still applies if you refinance that older mortgage, as long as the loan amount stays the same. Taxpayers who itemize are able to deduct two types of taxes paid on their Schedule A.
Personal property taxes, which include real estate taxes, are deductible along with state and local taxes that were assessed for the previous year. However, any refund received by the taxpayer from the state in the previous year must be counted as income if the taxpayer itemized deductions in the previous year. In addition, foreign real estate taxes not related to a trade or business are not tax deductible. Any donation made to a qualified charity is deductible within certain limitations.
Excess amounts must be carried over to the next year. These include cash contributions and donations of food, and they apply both to individuals and corporations. Any casualty or theft loss incurred as a result of a federally declared disaster can be reported on Schedule A. If a taxpayer incurs a casualty loss in one year and deducts it on their taxes, any reimbursement that is received in later years must be counted as income.
Taxpayers must complete Form and report the loss on Schedule A. Now, you must fall into one of four categories to be able to claim job-related expenses. You have to understand the rules. Some itemized deductions come with a few hurdles, of course.
If you have medical expenses, for example, you can only deduct the portion that exceeds 7. You might have to spend more time on your tax return. You need proof. You need to be able to substantiate your deductions. That means keeping records and being organized. If you normally take the standard deduction and are thinking of itemizing when preparing your return next year, start saving your receipts and other proof for your deductions now.
The standard deduction is basically a flat-dollar, no-questions-asked reduction in your adjusted gross income. When you take the standard deduction, you basically opt to take a flat-dollar deduction instead of picking and choosing from the multitudes of individual tax deductions out there.
Here are some big reasons people take the standard deduction instead of itemizing on their tax returns. It's faster. Taking the standard deduction makes the tax-prep process relatively quick and easy, which probably is one reason most taxpayers take the standard deduction instead of itemizing.
It usually gets bigger every year. Some people get more or less. These include expenses incurred on the job and are not reimbursed e. In summary, deductions for un-reimbursed employee expenses and tax preparation expenses cannot be included on Tax Returns.
Below is a summary of the sample amounts listed above in comparison to the Tax Return standard deductions. As you can see, with the filing status Single and Married Filing Separately, you would be well advised to itemize your deductions.
All other filing statuses would do better with the standard deduction. Important Tax Tip! If you are not sure, the eFile. If you still want to change it from one to the other and see the difference, we will also let you do that.
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