Taxpayers have two options when completing a tax return: take the standard deduction or itemize deductions. Do you know the difference? Most taxpayers use the option that gives them the lowest overall tax.
Here are some details about the two options.
Standard deduction
The standard deduction amount increases slightly every year. Your filing status, whether you are 65 or older or blind, and whether another taxpayer can claim you as a dependent, affects the amount of your deduction. Taxpayers who are age 65 or older on the last day of the year and don’t itemize deductions are entitled to 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 of Form 1040-SR, U.S. Tax Return for Seniors, is on page 4 of that form.
Not all taxpayers can take a standard deduction, which is discussed in the Instructions for Forms 1040 and 1040-SR. Those taxpayers include:
- 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. However, nonresident aliens who are married to a U.S. citizen or resident alien can take the standard deduction in certain situations.
Itemized deductions
Taxpayers choose to itemize deductions by filing Schedule A, Form 1040, Itemized Deductions. Itemized deductions that taxpayers may claim include:
- State and local income or sales taxes
- Real estate and personal property taxes
- Home mortgage interest
- Mortgage insurance premiums on a home mortgage
- 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
Some itemized deductions, such as the deduction for taxes, may be limited. Taxpayers should review the instructions for Schedule A Form 1040 for more information on limitations.
Migration Resource Center Tax Services
The Migration Resource Center staff has a team of tax consultants, tax attorneys, enrolled agents, and CPAs. We can assist you with tax planning as well as reducing tax. In addition, we provide workshops on the Citizenship Interview and Test, Taxes, and Personal Finance. We offer workshops both online and in traditional classroom environments.
Contact Migration Resource Center Taxpayer Services now for assistance with your taxpayer concerns. Use our online form or call (646) 827-2959.