Standard vs Itemized Deductions Explained
Every taxpayer can choose between the standard deduction (a fixed amount based on filing status) or itemized deductions (the total of your qualifying expenses). You should choose whichever is larger to minimize your tax.
Common itemized deductions include mortgage interest, state and local taxes (capped at ,000), charitable contributions, and medical expenses exceeding 7.5% of your AGI. Since the standard deduction was nearly doubled in 2018, fewer taxpayers benefit from itemizing.
Taxpayers age 65 or older receive an additional standard deduction amount. This extra amount may tip the balance toward the standard deduction for many senior taxpayers.
Frequently Asked Questions
What is the SALT deduction cap?
The State and Local Tax (SALT) deduction is capped at ,000 per return (,000 if married filing separately). This includes state income taxes, property taxes, and local taxes combined. This cap was introduced in 2018.
When does it make sense to itemize?
Itemizing makes sense when your total qualifying expenses exceed the standard deduction. This is most common for homeowners with large mortgages, people in high-tax states, or those who make significant charitable donations.
Can I switch between standard and itemized each year?
Yes, you can choose the most beneficial option each year. There is no commitment to one method. Calculate both options each year to ensure you are getting the largest deduction possible.
What medical expenses qualify for itemized deductions?
Medical and dental expenses that exceed 7.5% of your adjusted gross income can be itemized. This includes insurance premiums, doctor visits, prescriptions, and other qualifying health care costs not reimbursed by insurance.
Do I get a higher standard deduction if I am over 65?
Yes, taxpayers age 65 or older receive an additional standard deduction. The extra amount varies by filing status and is adjusted annually for inflation.