With two options for taking deductions on your tax return, it’s important to understand the facts. A majority of taxpayers opt for the standard deduction because it’s relatively easy. Then again, depending on your financial situation, itemizing may be a better strategy.
Understanding The Standard Deduction
When you use the standard deduction, the Internal Revenue Service (IRS) allows you to subtract a specific amount from your adjusted gross income (AGI) to determine your taxable income. The amount depends on your tax filing status. When you do the math, the standard deduction can reduce your AGI by a considerable amount. For 2023 tax returns filed in April 2024, the standard deduction is:
- $13,850 for single taxpayers (or married but filing separately)
- $20,800 for heads of household
- $27,700 for married couples filing jointly
One drawback to the standard deduction is that you can’t deduct interest on your mortgage or property taxes. On the other hand, you can take the standard deduction without providing proof to the IRS. However, if you’re claimed as a dependent on someone else’s tax return, you may get a lower standard deduction.
“To be eligible for the age-based deduction, you must have reached your 65th birthday by the end of the 2023 tax year (for taxes due in 2024).”
Taxpayers Age 65 & Older Get An Additional Standard Deduction
Under IRS rules, if you’re age 65 and older, or considered legally blind, you can add an additional standard deduction amount to the existing 2023 standard deduction. To be eligible for the age-based deduction, you must have reached your 65th birthday by the end of the 2023 tax year (for taxes due in 2024).
If you’re a single taxpayer age 65 and older or blind, add $1,850 to standard deduction. If you’re 65 or older and also blind, add $3,700. If you’re married and filing jointly or separately, add $1,500 per qualifying person if you’re 65 and older or blind. If you’re 65 or older and also blind, add $3,000 per qualifying person.
Understanding Itemized Deductions
Itemized deductions can also lower your AGI if the expenses you claim are allowed by the IRS. Some common deductions include:
- A percentage of unreimbursed medical and dental expenses paid out of pocket.
- The SALT deduction which includes up to $10,000 in property taxes and either local state and local income taxes or sales taxes.
- Contributions made to IRS-approved charities with the deduction amount typically ranging from 20% to 60% of your AGI.
For complete information, go to the IRS website or touch base with an FRC® trained advisor who can connect you with a reputable tax professional in your area.
