Standard Deduction Vs Itemized Deductions

29 Sep 2020

When filing taxes, one of the first things to consider is whether to take a standard deduction or to itemize your deduction. In this article, I’ll be highlighting the key differences and benefits of the two to help you make the best decision.

What is a Standard Deduction?

A standard deduction reduces your amount of taxable income on a no-questions-asked basis. If you opt for this, you cannot deduct home mortgage interest or other popular deductions such as medical expenses or charitable donations. In order to do so, you’d need to itemize. 

These are the standard deduction amounts by filing status in 2019 and 2020:

Filing Status

2019 tax year

2020 tax year

Single

$12,200

$12,400

Married, filing jointly

$24,400

$24,800

Married, filing separately

$12,200

$12,400

Head of household

$18,350

$18,650

  • For those who are over 65 or blind, the standard deduction is $1,300 higher. 
  • If someone can claim you as a dependent, you get a smaller standard deduction. 
  • Even if you file separately, both you and your spouse have to choose the same deduction method

What are Itemized Deductions?

Itemized deductions are tax deductions taken from various expenses you incurred during the tax year, making them a little more complex than standard deductions. There are many possible itemized deductions out there, you just need to find which ones you qualify for. Some common ones are medical expenses, property taxes, charitable contributions, and mortgage interest, among many others. However, unlike standard deductions, itemizing requires you to spend more time filling out forms and proving that you qualify for those deductions. 

Which One Is Best?

Ultimately, which deduction style you chose depends on which one grants you a greater tax reduction. Usually, low-income filers opt for standard deductions while high-income taxpayers are more likely to file itemized deductions. However, with the recent increase in the standard deduction amount, filers might be more likely to choose that option. The standard deduction route also saves a great deal of time due to its simplicity, so if its also saving you more money, then it’s definitely the ideal choice. But it is also important that you carefully calculate your itemized deductions because you might qualify for several deductions and save more money than going standard, especially if you have a mortgage or home equity loan. To avoid mistakes, you can try using tax software, which will make the calculations for you and allow you to select the best method.