Standard Deduction VS Itemizing

Standard Deduction VS Itemizing

Standard Deduction vs. Itemizing Your Tax Return: What You Need to Know
When it comes to preparing your tax return, you have two options for reducing your taxable income: the standard deduction and itemizing. While both methods have the same goal of lowering your tax bill, they differ in how they achieve this. In this post, we'll go over the basics of each option to help you make an informed decision when filing your taxes.
Standard Deduction The standard deduction is a fixed dollar amount set by the government that you can subtract from your taxable income. This amount is the same for all taxpayers, regardless of their expenses. For the 2022 tax year, the standard deduction is $12,550 for single filers and $25,100 for married couples filing jointly. If you're 65 or older, you may be eligible for an additional standard deduction.
The standard deduction is the simpler of the two options and doesn't require you to keep track of specific expenses throughout the year. However, if your expenses don't add up to more than the standard deduction amount, you won't be able to lower your taxable income by itemizing.
Itemizing Itemizing is a method of claiming specific expenses on your tax return to reduce your taxable income. To itemize, you'll need to keep receipts and records of your expenses throughout the year. Some of the most common expenses you can itemize include:

• Mortgage interest
• State and local taxes (SALT)
• Charitable contributions
• Medical expenses
• Casualty and theft losses

If the total of your itemized expenses is greater than the standard deduction, you'll lower your taxable income by itemizing. However, if your itemized expenses are less than the standard deduction, you'll benefit more from taking the standard deduction.
Choosing the Right Option for You Whether you should choose the standard deduction or itemize depends on your individual circumstances. If you have a lot of expenses that are eligible for itemization and the total of those expenses is greater than the standard deduction, itemizing is the better option. On the other hand, if your expenses are minimal, you'll likely benefit more from taking the standard deduction.
In conclusion, understanding the standard deduction and itemizing is essential to making an informed decision when preparing your tax return. By weighing the pros and cons of each option, you can reduce your taxable income and lower your tax bill. If you're unsure which option is best for you, consider consulting a tax professional for guidance.