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2023 Tax Planning - Standard vs Itemized Deductions

December 15, 2023



There are two ways that a taxpayer can claim deductions on their federal income tax return: itemizing deductions or the standard deduction. Deductions can reduce the amount of your taxable income, so consider using the method that gives you the lower tax. Due to the tax law changes in the recent years, if you itemized in the past, you may not want to continue to do so, so it's important for you to identify all deductions you want to report on your income tax return.

 

Here are some details about the two methods to help you understand which will benefit you the most:

 

Standard Deductions

The standard deduction amounts are fixed dollar amounts that are adjusted annually for inflation. The standard deduction amount depends on the filing status of the taxpayer, whether they are 65 or older (elderly) or blind, and whether another taxpayer can claim  the taxpayer as a dependent.

 

Please see the table below for the Standard Deduction amounts from 2022 to 2024.  


However, a taxpayer who can't use the standard deduction is in one of the following situations:

  • A married individual filing separately whose spouse itemizes deductions.

  • An individual who files a tax return for a period of less than 12 months because of a change in his or her annual accounting period.

  • An individual who was a nonresident alien or a dual-status alien during the year. However, nonresident aliens who are married to a U.S. citizen or resident alien at the end of the year and elect to be treated as U.S. residents for tax purposes may take the standard deduction.


Itemized Deductions

Taxpayers may need to itemize deductions because they cannot use the standard deduction. They may also itemize deductions if the amount is greater than their standard deduction.

 

A taxpayer may itemize deductions for the following items:

  • State and local income or sales taxes, up to $10,000 together with real estate and personal property taxes

  • Real estate and personal property taxes, up to $10,000 together with state and local income or sales taxes

  • Mortgage interest

  • Mortgage insurance premiums

  • Personal casualty and theft losses resulting from a federally declared disaster

  • Donations to a qualified charity (up to 60% of adjusted taxable income)

  • Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income

 

Reference:




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