Tax deductions

Know the difference between standard and itemized tax deductions

Taxpayers have two options when filing a tax return, take the standard deduction or itemize their deductions. Most taxpayers use the option that gives them the lowest overall tax.

Due to all the changes in tax law over the past few years, including increases in the standard deduction, people who have itemized in the past might want to switch to the standard deduction.

Here are some details on the two options.

Standard deduction
The standard deduction amount increases slightly each year and varies by filing status. The amount of the standard deduction depends on the taxpayer’s filing status, whether they are 65 or older or blind, and whether another taxpayer can claim it as a dependent. Taxpayers age 65 or older on the last day of the year who do not itemize deductions qualify for a higher standard deduction.

Most filers who use Form 1040 can find their standard deduction on the first page of the form. The standard deduction for most filers on Form 1040-SR, US Senior Income Tax Return, is on page 4 of that form.

Not all taxpayers are eligible for a standard deduction, which is described in the instructions for Forms 1040 and 1040-SR. These taxpayers include:

  • A married individual filing as married filing separately whose spouse is itemizing deductions – if one spouse is itemizing on a separate return, both must itemize.
  • An individual who files a tax return for a period of less than 12 months. This is rare and could be due to a change in their annual accounting period.
  • A natural person who was a nonresident alien or a dual-status alien during the year. However, nonresident aliens married to a U.S. citizen or resident alien may benefit from the standard deduction in certain situations.

Detailed deductions
Taxpayers choose to itemize deductions by completing Schedule A, Form 1040, Itemized Deductions. Itemized deductions that taxpayers can claim include:

  • State and local income or sales taxes
  • Property and personal property taxes
  • Mortgage interest
  • Mortgage insurance premiums on a home loan
  • Personal Losses and Thefts from a Federally Declared Disaster
  • Donations to a qualified charity
  • Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income

Certain itemized deductions, such as the tax deduction, may be limited. Taxpayers should see the instructions in Schedule A of Form 1040 for more information on the limitations.