The standard deduction reduces taxable income and is available to most US taxpayers. It’s an easier option, but itemizing may reduce tax liabilities further. Couples may take over $10,000 USD, and expenses like home mortgage interest and medical expenses can be itemized. The standard deduction saves time and reduces the likelihood of an audit. Elderly or disabled people may have a higher standard deduction.
A standard deduction is a deduction that reduces the amount of income subject to tax and is available to almost everyone who files income taxes in the United States. In general, taxpayers have the option of taking the standard amount or itemizing their deductions. Various expenses may be subject to itemization which would reduce the amount of taxable income even further than the standard, but whether an individual should itemize depends solely on the circumstances involved.
According to the Internal Revenue Service, most taxpayers use the standard deduction amount. It is definitely an easier option, although some people may be paying the IRS more money than they need to by choosing this method. Still, some choose convenience over reduced tax liabilities. Choosing this option means you don’t need to add, track receipts, and try to justify each expense as one that should be itemized.
The key to determining whether to take the standard amount or itemize is to first determine if the standard deduction amount is more than itemizing would be. For most people, the standard makes the most sense. Couples may take more than $10,000 United States Dollars (USD), and the amounts may be adjusted annually. If an adjustment is made, it is because the quantity is increased.
When choosing between standard and itemized deductions, it is necessary to look at what expenses can be included in the itemization. Interest on home mortgages can be, just like medical expenses, once they reach a certain percentage of income. Other miscellaneous work-related expenses may also be deducted.
The benefits of taking the standard deduction are many. First, there’s no need to worry about what may or may not qualify. Second, there is a considerable saving of time. Third, taxpayers can often save the expense of having a professionally prepared tax return. Returns using this option are also less likely to be audited.
It should also be remembered that a standard deduction is higher for some elderly or disabled people. This can also play a role in which a deduction is taken. Some may forget that this is an additional deduction added to the standard amount and therefore pay a higher amount of tax than is necessary.
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