Itemize or Standard Deduction

The decision to itemize or take the standard deduction is usually pretty clear once you start working on your taxes. However, it is important to know what qualifies as an itemized deduction so that you can keep the appropriate documentation throughout the year.

First, whether you take the standard deduction or itemize deductions, that deduction reduces taxable income. The easiest way to think of the standard deduction is every taxpayer has an IRS preset amount they are allowed to reduce their taxable income by based on filing status, age, and if they are blind. The standard deduction varies by year and is issued by the IRS at some point before the end of the tax year.

If a taxpayer has qualified expenses that are in excess of their standard deduction for the year, then it could be beneficial to itemize to further reduce taxable income. Some taxpayers are required to itemize instead of taking the standard deduction. As long as a taxpayer qualifies, then they can choose to take the standard deduction even if their itemized deductions may give them a larger deduction.

Some items that qualify as itemized deductions - it is important to note that these items all have limits and qualifications in order to “count” towards the itemized deduction total:

• State/local income tax

• Real estate tax

• Mortgage interest

• Charitable donations

• Large amounts of unreimbursed medical expenses

If you are unsure of if something qualifies, your CPA can provide guidance.

All information contains general information for taxpayers and should not be relied upon as advice. Taxpayers should seek professional tax advice for information about your specific situation.