What is Standard Deduction?

The standard deduction is a fixed dollar amount established annually by the IRS. It reduces taxable income and is available to all taxpayers who do not itemize deductions. The amount varies based on the taxpayer’s filing status (e.g., single, married filing jointly, head of household) and is adjusted periodically for inflation.

SUMMARY

• A fixed dollar amount you can subtract from your income.

• The standard deduction amount depends on your filing status.

• It’s easy and automatic—no need to keep records or receipts.

• 2024 Single filers: $14,600

• 2024 Married filing jointly: $29,200

• 2024 Head of household filers: $21,900

What are Itemized Deductions?

Itemized deductions allow taxpayers to claim specific eligible expenses they incurred during the tax year. These specific expenses are beneficial if the total of these deductions exceeds the standard deduction for your filing status. Taxpayers choosing to itemize must retain proper records and receipts to substantiate their claims in case of an audit.

ELIGIBLE DEDUCTIONS

• Mortgage interest paid on a primary or secondary home

• State and local taxes (up to $10,000 limit)

• Medical and dental expenses (exceeding 7.5% of adjusted gross income)

• Charitable contributions

Can I choose both?

No. Taxpayers cannot claim both the standard deduction and itemized deductions; they must select one. So choose between the two based on which provides the greater tax benefit.

Which one should I choose?

Generally, most people take the standard deduction because it’s a higher amount or just simpler. Itemized deductions is typically more beneficial for homeowners, high-income earners, or those with substantial charitable contributions or medical costs. If you have large deductible expenses, you can benefit from itemizing.

Can you give an analogy?

Sure! Think of it like choosing between a flat discount (standard) or calculating each coupon (itemized)—you pick the one that gives you the biggest savings!