When completing a tax return, taxpayers have two options: take the standard deduction or itemize their deductions. Most taxpayers use the option that gives them the lowest overall tax. Due to all the tax law changes in recent years, including increases to the standard deduction, that means taking the standard deduction - but not always. Let's look at a few details about these two options.
Standard deduction
The standard deduction amount increases slightly every year, and it varies by filing status. Factors that affect the standard deduction amount include the taxpayer's filing status, whether they are 65 or older or blind, and whether another taxpayer can claim them as a dependent. 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, U.S. Individual Income Tax Return, can find their standard deduction on the first page of the form. For most filers of Form 1040-SR, U.S. Tax Return for Seniors, the standard deduction, is on page 4 of that form.
Not all taxpayers can take a standard deduction. Those taxpayers include:
A married individual filing as married filing separately whose spouse itemizes deductionsif 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 should file 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. For more information on these limitations or any other questions, don't hesitate to contact the office
| About Author |
|
Mr. Maker is a certified Public Accountant and serving the South Asian community since 1993.
|
Website: https://taxprofessionalsnw.com/newsletter.php
Disclaimer: Please use this channel at your own discretion. These articles are contributed by our users. We are not responsible or liable for any problems related to the utilization of information of these articles.
View All Contributions
|
