To receive the largest tax break possible, taxpayers should familiarize themselves with some fundamental aspects of completing their taxes, including the difference between standard and itemized deductions. In most cases, you’re allowed to choose either method when filing your taxes, so it’s vital to determine which method is the best fit for your tax situation.
Despite the importance of the distinction between the two types of deductions and the frequent advantages of itemizing, it’s estimated that only about one-third of Americans itemize their deductions.
Let’s define both types and examine some of the finer details of each.
Standard: A fixed dollar amount taxpayers can deduct from their taxable income based on their age and filing status. Standard deductions for 2016 are:
The above deductions may increase for individuals who are blind and for those over the age of 65.
Itemized: Taxpayers can deduct eligible expenses from their taxable income. The amount by which the deduction reduces your taxes is determined by your tax bracket.
There are potential benefits for choosing either standard or itemized deductions, depending on your unique circumstances.
RELATED: Donations: What Are They Really Worth?
The advantages of standard deductions include:
On the other hand, itemizing deductions often results in less taxable income and therefore less taxes owed. You might want to itemize your deductions on a Form 1040, Schedule A if your expenses included any of the following:
*Also, if you are filing separately from your spouse (MFS) and your spouse chooses to itemize their deductions, you will be required to itemize as well and will not be allowed to take the standard deduction option.
Essentially, if you spent a significant amount on medical treatment, mortgage interest, business expenses, or charitable gifts, you should examine the financial discrepancy between standard and itemized deductions in your case.
Knowing the basics of filing your taxes can go a long way toward lessening your tax liability or even increasing your refund. However, many individuals who have failed to file in recent years or who have let their tax liabilities swell to an impractical figure might need the help of a tax representation professional.
If you or your business owe the IRS more than $10,000 and have been receiving correspondence threatening to enforce a lien, levy, or garnishment or an audit of your previous tax filings, please contact S.H. Block Tax Services today. We are a family firm with more than a century’s worth of tax representation experience, and we would love the chance to speak with you about your current situation.
Please call (410) 872-8376 today to receive a free consultation, during which we can diagnose your problem and develop an effective resolution that will bring you and your business back into compliance. You can also complete the form on this page to register for a free consultation and learn more about our firm.
Remember, federal tax deadlines and those in the State of Maryland are quite strict, and IRS agents are more aggressive than ever during this time of year. If you have a tax liability that has developed into a serious issue, the time to act is now!
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.
Filing and paying state and federal taxes can be complicated, inconvenient, and unnerving. Deadlines can…
One of the biggest side effects of pandemic lockdowns was the rise in some gig…
If you’re a long-haul truck driver, chances are you make several work-related purchases in a…
Nurses have gotten a lot of press lately with labor shortages and wage concerns. If…
If you’ve fallen behind on filing your taxes, you’re not alone. There are a multitude…
The gig economy is here to stay, and more people than ever are earning money…