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Itemized Deductions or the Standard Deduction: Which Is Better?

You can itemize or take the standard deduction, but you can't do both. Here's how to choose.
Oct. 12, 2018
Income Taxes, Personal Taxes, Taxes
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Deciding whether to itemize or take the standard deduction can make a huge difference in your tax bill. But the decision isn’t always easy. Here are some things you need to know about the standard deduction versus itemized deductions on tax returns.

  • The standard deduction is basically a flat-dollar, no-questions-asked reduction in your adjusted gross income.
  • Itemized deductions are basically expenses allowed by the IRS that can decrease your taxable income.
  • You can either take the standard deduction or itemize on your tax return. You can’t do both. The question is which method saves you more money.
  • Here’s what it boils down to: If your standard deduction is less than your itemized deductions, you probably should itemize. If your standard deduction is more than your itemized deductions, it might be worth it to take the standard and save some time.

What it means to take the standard deduction

The standard deduction is basically a flat-dollar, no-questions-asked reduction in your adjusted gross income. When you take the standard deduction, you basically opt to take a flat-dollar deduction instead of picking and choosing from the multitudes of individual tax deductions out there.

Advantages of taking the standard deduction

Here are some big reasons people take the standard deduction instead of itemizing on their tax returns.

  • It’s faster. Taking the standard deduction makes the tax-prep process relatively quick and easy, which probably is a big reason most taxpayers take the standard deduction instead of itemizing. You might be able to use the 1040EZ and the 1040A; they’re much shorter and simpler than the regular Form 1040.
  • It usually gets bigger every year. Congress sets the amount of the standard deduction, and it’s typically adjusted every year for inflation.
Filing status2018 tax year2017 tax year
Single$12,000$6,350
Married, filing
jointly
$24,000$12,700
Married, filing
separately
$12,000$6,350
Head of
household
$18,000$9,350
  • Some people get more (or less). The standard deduction is higher for people over 65 or blind, though filing status is still a factor. And if someone can claim you as a dependent, you get a smaller standard deduction.
  • One note for married people: You can’t take the standard deduction if you’re married but filing separately and your spouse chooses to itemize. You both have to do the same thing — either itemize or take the standard deduction.
  • If this is for you, you can learn more about the standard deduction in this article.

» MORE: Try our free tax calculator

What it means to itemize on your tax return

  • Itemized deductions are basically expenses allowed by the IRS that can decrease your taxable income.
  • When you itemize on your tax return, you basically opt to pick and choose from the multitudes of individual tax deductions out there instead of taking the flat-dollar standard deduction.

Advantages of itemized deductions

  • The itemized deductions add up to more than the standard deduction. The more you can deduct, the less you’ll pay in taxes, which is why some people itemize — the total of their itemized deductions is more than the standard deduction.
  • There are hundreds of possible deductions. The IRS allows taxpayers to deduct tons of things, such as medical expenses, property taxes, charitable contributions and mortgage interest. There are a multitude of deductions available. Check out this article for a big list of popular tax deductions.
  • Some situations make itemizing especially attractive. If you own your home, for example, your itemized deductions for mortgage interest and property taxes may easily exceed the standard deduction, saving you money.
  • They understand the rules. Some itemized deductions come with a few hurdles, of course. If you have medical expenses, for example, you can only deduct the portion that exceeds 7.5% of your adjusted gross income.
  • They have the time. If you itemize, you’ll need to set aside extra time when preparing your returns to fill out the big enchilada of tax forms: the Form 1040 and Schedule A (you can’t use the shorter 1040EZ or 1040A).
  • They have proof. You need to be able to substantiate your deductions. That means keeping records and being organized. If you normally take the standard deduction and are thinking of itemizing when preparing your return next year, start saving your receipts and other proof for your deductions now.

How to decide whether to itemize or take the standard deduction

  • Here’s what it boils down to: If your standard deduction is less than your itemized deductions, you probably should itemize and save money. If your standard deduction is more than your itemized deductions, it might be worth it to take the standard and save some time.
  • Run the numbers both ways. If you’re using tax software, it’s probably worth the time to answer all the questions about itemized deductions that might apply to you. Why? The software or your advisor can run your return both ways to see which method produces a lower tax bill. Even if you end up taking the standard deduction, at least you’ll know you’re coming out ahead.

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