Choosing whether to itemize deductions or accept the standard deduction is one of the first choices that people must make when filing their taxes. A taxpayer’s decision may be influenced by a number of variables, such as modifications to their financial position, adjustments to the standard deduction, and recent changes to the tax code.
Typically, the choice that results in the lowest overall tax is chosen by most taxpayers. Here are some things that taxpayers should be aware of about standard and itemized deductions when they start to think about submitting their tax returns.
Every year, the standard deduction amount goes up a little bit. According to the taxpayer’s filing status, whether they are 65 or older or blind, and if another taxpayer can claim them as a dependent, the standard deduction amount varies. A greater standard deduction is available to taxpayers who don’t itemize deductions and are 65 years of age or older on the final day of the tax year.
On the first page of the Form 1040, the standard deduction is often found by filers. The last page of Form 1040-SR, U.S. Tax Return for Seniors, contains the standard deduction for the majority of taxpayers.
According to the Instructions for Form 1040 and 1040-SR, not all taxpayers can take a standard deduction, including:
- A married individual filing as married filing separately whose spouse itemizes deductions – if one spouse itemizes on a separate return, both must itemize.
- An individual who files a tax return for a period of less than 12 months. This is uncommon and could be due to a change in their annual accounting period.
- An individual who was a nonresident alien or a dual-status alien during the year. Nonresident aliens who are married to a U.S. citizen or resident alien, however, can take the standard deduction in certain situations.
Taxpayers who choose to itemize deductions may do so by filing Schedule A, Form 1040, Itemized Deductions. Itemized deductions that taxpayers may claim can include:
- State and local income or sales taxes.
- Real estate and personal property taxes.
- Home mortgage interest.
- Personal casualty and theft losses from a federally declared disaster.
- Gifts to a qualified charity.
- Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income.
There may be a cap on some itemized deductions, including the tax deduction. For further details on restrictions, taxpayers should read the Schedule A Form 1040 instructions.