When filling out your tax return, you can claim the standard deduction or itemize your deductions. Roughly 87% of taxpayers claim the standard deduction. Should you do the same?
The answer, as with most tax questions, is: It depends. The details below can help you decide.
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What Is the Standard Deduction?
The standard deduction is a set amount determined by the IRS that you subtract from your adjusted gross income (AGI). The amount varies based on your filing status, age, whether you are considered blind, and whether you are claimed as someone else’s dependent.
The standard deduction is adjusted annually to keep up with the cost of inflation. For example, for the tax year 2020, the standard deduction for a single filer was $12,400; for 2023, the amount is $13,850.
In some cases, you can’t take the standard deduction. For example, if you are married and filing separately from your spouse, and your spouse itemizes their deductions, you’ll need to itemize your deductions, too. That will be the case no matter how much you have in qualified expenses.
Pros and Cons
Pros
- You won’t need to keep any receipts to document the amount.
- It is simple and easy to understand.
- It doesn’t require any additional forms to file on the tax return.
- The amount increases annually with inflation.
Cons
- It’s a flat deduction for all taxpayers with a particular filing status. Even if you have more expenses than others, you get the same deduction.
What Are Itemized Deductions?
While your standard deduction is a set amount determined by the IRS, the total of your itemized deductions is based on your personal expenses.
Generally, you should choose to itemize your deductions if your allowable deductions are more than your standard deduction. You can claim itemized deductions for state and local income, real estate or personal property taxes or sales taxes, mortgage interest, charitable contributions, medical and dental expenses and disaster losses.
Some itemized deductions have maximum limits. For example, taxpayers can only deduct certain types of state and local taxes—often referred to as SALT—up to a total of $10,000.
Pros and Cons
Pros
- Generally, itemizing your deductions will give you a larger tax write-off than the standard deduction.
Cons
- You will have to keep all receipts to document the itemized deductions you claim.
- You’ll need to complete Schedule A to claim the itemized deductions.
- It may take more time to complete your tax return.
Standard Deduction vs. Itemized Deductions: What’s the Difference?
When you file your tax return, you choose between taking the standard deduction and itemizing your deductions. Generally, you should select the option that would reduce your taxes the most.
If you claim the standard deduction, you’re accepting the flat amount determined by the IRS. You’ll simply enter the available standard deduction for your filing status on your Form 1040. Claiming the standard deduction is easier because you don’t have to keep track of what you spend throughout the year. You also don’t need to hold on to supporting documents like receipts, bank statements, medical bills and tax forms.
Itemizing deductions lets you claim the total amount that you actually spent on certain deductible expenses, such as medical expenses, state and local taxes, mortgage interest and charitable deductions. If you itemize, you’ll need to list each of these expenses on Schedule A and include it with your tax return.
If your total itemized deductions exceed the standard deduction available for your filing status, itemizing can lower your tax bill. For 2023 tax returns (those filed in 2024), the standard deduction numbers to beat are:
- $13,850 for single taxpayers and married individuals filing separate returns
- $20,800 for heads of household
- $27,700 for married couples filing jointly or qualifying widow(er)
Taxpayers age 65 or older or blind can claim larger standard deductions. A worksheet in the IRS Instructions for Form 1040 can help you calculate this amount.
When Is Itemizing Deductions Right For You?
Few taxpayers have enough itemized deductions for itemizing to make sense. However, it’s worth looking over your deductible expenses to see whether itemizing can reduce the amount of tax you owe (or give you a bigger tax refund).
Here are some itemized deductions you may be able to claim on your 2023 tax return.
Medical Expenses
State and Local Taxes
Mortgage Interest
Gifts to Charity
Casualty Losses
Other Itemized Deductions
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Bottom Line
Choosing to itemize your deductions will affect your taxes differently than claiming the standard deduction. The standard deduction is a flat amount provided by the IRS; claiming it requires no additional forms or recordkeeping. Your itemized deductions are expenses the IRS recognizes, such as mortgage interest, state taxes and medical expenses. If the total of your itemized deductions exceeds the standard deduction, then itemizing makes sense for you. If not, claiming the standard deduction makes more sense.
