It’s tax season again. That means you’ll need to decide whether to use the standard deduction or itemized deductions when completing your taxes this year. Finding the right approach tailored to your specific circumstances is crucial. What works for one taxpayer may not necessarily be the best option for another. Examining the unique benefits and drawbacks of each could be the key to maximizing your tax savings. Whether you’re a seasoned taxpayer or navigating the process for the first time, understanding the nuances of standard and itemized deductions is essential. In this post, we’ll weigh the advantages, potential tax savings, and eligibility criteria for both options. By the end, you’ll be equipped with the knowledge to make an informed decision that best suits your financial situation and goals.
Standard Deduction vs. Itemized Deductions: The Basics
Before we dive into the specifics of both the standard deduction and itemizing, it’s important to understand the basic differences between them.
The standard deduction is a fixed dollar amount that reduces the income on which you’re taxed. It’s a simplified way of reducing your taxable income, and the amount varies based on your filing status. On the other hand, itemizing allows you to list out individual expenses that qualify for a tax deduction, such as mortgage interest, medical expenses, charitable contributions, and more. You can choose to itemize deductions if the total amount of your eligible expenses exceeds the standard deduction for your filing status. Understanding the types of expenses that qualify for itemized deductions is crucial to making an informed decision about which option is best for you.
Standard Deduction Overview
The Tax Cuts and Jobs Act (TCJA) of 2017 made significant changes to the individual income tax, including the suspension of personal exemptions (2018 – 2025). To compensate, the standard deduction was nearly doubled for the 2018 tax year. Each year since, the standard deduction has increased in value to compensate for inflation.
For the 2024 tax year (taxes due April 15, 2025), the standard deduction is as follows:
- Single or Married Filing Separately – $14,600
- Married Filing Jointly – $29,200
- Head of Household – $21,900
Next year, the standard deduction for the 2025 tax year (taxes filed April 2026) will be:
- Single or Married Filing Separately – $15,000
- Married Filing Jointly – $30,000
- Head of Household – $22,500
Taxpayers who are 65 years or older or blind, however, receive additional deduction amounts above the standard deduction offered to most taxpayers. Here are the amounts for the 2023 and 2024 tax years.
| Filing Status | 2024 Additional Deduction (Per Person) | 2025 Additional Deduction (Per Person) |
| Single or Head of Household, 65+ or blind | $1,950 | $2,000 |
| Single or Head of Household, 65+ and blind | $3,900 | $4,000 |
| Married (Jointly or Separately) or Widow(er), 65+ or blind | $1,550 | $1,600 |
| Married (Jointly or Separately) or Widow(er), 65+ and blind | $3,100 | $3,200 |
Most taxpayers are eligible to take the standard deduction, but there are a few exceptions. If you are married and file separately, you may not use the standard deduction if your partner opts for itemized deductions. You are also ineligible if you’re filing as an estate, common trust fund, or a partnership. Non-resident aliens or dual-status aliens who are filing for a period of less than 12 months are also ineligible. If you are claimed as a dependent on someone else’s tax return, your deduction may also be limited.
Why Choose The Standard Deduction?
There are many reasons why the standard deduction is a popular choice with taxpayers. The most obvious is how easy it is to use. You don’t have to add up receipts or track expenses. You just simply plug in the number associated with your filing status. That also saves you time and reduces your chances of raising a red flag with the IRS. For the elderly or those who are blind, it generally provides for a larger tax deduction, as well.
Itemized Deductions Overview
Taking the standard deduction may seem like the easy choice, but it may not provide the biggest benefit when it comes to reducing your taxable income. By itemizing deductions, you may actually maximize your tax benefits. Unlike the standard deduction, you are not limited to a specific amount when you itemize. Of course, you’ll need to do a little math to determine which method gives you the largest deduction.
Some of the expenses typically included with itemized deductions include:
- Charitable contributions
- Medical and/or dental expenses
- Investment interest
- Mortgage points and interest
- State and local taxes (sales and/or property taxes)
- Business expenses
- Casualty, disaster, or theft losses
- Gambling losses (equal to or less than the amount won)
Unfortunately, deductions for tax preparation fees and most unreimbursed employee expenses are no longer eligible. Interest on home equity loans or lines of credit that are used for things other than buying, building, or improving your home is also ineligible.
If you choose to itemize, you must list all qualifying deductible expenses on Schedule A. Keep in mind that you will need to substantiate your deductions by providing proof, such as a receipt or bank record.
Itemized Deductions Pros & Cons
There are many pros and cons when it comes to itemizing deductions. The main benefit, of course, is the ability to deduct a higher amount than you would under the standard deduction. Those who give generously to charity, have large mortgages, or high medical expenses generally benefit from itemizing. In some cases, itemized deductions can also lead to a larger tax refund.
On the flip side, the cons include more time and effort, as well as certain caps and restrictions on certain deductions. When you choose to itemize, you’ll also need to keep detailed records and receipts. Be sure to keep these items for at least six years, just in case you are audited. If you don’t have them readily available, talk to a tax professional before hunting them down. You don’t want to waste precious time and energy just to find out that it won’t benefit you in the end.
Bottom Line
Deciding whether to use the standard deduction or itemized deductions is a personal choice. You should carefully weigh the pros and cons of each, and crunch the numbers to determine which has the most tax benefits. Although most taxpayers will ultimately choose the standard deduction, the time and effort using itemized deductions may pay off for you in the end. It’s also a good idea to consult a tax expert, like those at Tax Defense Network, to ensure you are taking advantage of all tax credits and deductions available to you. To schedule your free consultation, call 855-476-6920 today!