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Standard vs. Itemized Deduction: How to Know Which One to Use

Standard vs. Itemized Deduction: How to Know Which One to Use

Amherst, NH Resident Has Questions

The standard deduction for 2023 is $13,850 for single filers and $27,700 for married couples filing jointly. If other eligible deductions exceed this amount, then you will want to itemize your deductions instead. These include mortgage interest, unreimbursed medical expenses exceeding 7.5% of your income, charitable contributions, property taxes, and state or local income tax. To determine whether you should use the standard or itemized deductions, you will first need to have an idea of how many deductions you will have and which offers the greatest amount of savings.

An Amherst resident was overwhelmed when it came to tax time. The first question that she had was whether she should be taking the standard deduction or itemizing on her tax return.

Deciding Which Deduction to Take on Your Taxes

Itemized deductions can allow taxpayers to lower their tax bill even further beyond the standard deduction offered. While this may not exceed the dollar amount for the standard deduction offered to everyone, if you have a significant amount of qualified deductions, you should take the time to calculate them and decide which is more advantageous. Itemized deductions are separate from self-employment expenses and student loan interest, which are considered below-the-line deductions.

Using the IRS Schedule A, you can break your itemized deductions down into various categories to determine the total amount. Which deduction, standard vs. itemized, that you use may vary from year to year depending on qualified expenses that you had during the tax year. While itemizing your deductions can be more tedious than taking the standard deduction, depending on the total of your deductions for the year it can offer plenty of tax savings. Either the standard deduction or the total itemized deductions will be subtracted from your income, giving you your taxable income.

With the assistance of the Merrimack Tax Associates team, the Amherst resident was able to save a significant amount by itemizing her deductions instead of taking the standard deduction when filing her tax return.

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