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2020 Taxpayer Planning: Standard vs Itemized Deductions

There are two ways that a taxpayer can take deductions on his or her federal income tax return: itemized deductions or the standard deduction. Deductions can reduce the taxable income, thus it’s important for taxpayers to identify which deductions will benefit the most.

Standard Deduction

The standard deduction is a fixed dollar amount, which is set by the IRS every year. The standard deduction amount depends on the taxpayer's filing status, whether they are 65 or older (elderly) or blind, and whether another taxpayer can claim them as a dependent. Please see below table for the standard deductions for tax year 2019 and 2020.

However, a taxpayer cannot use the standard deduction in 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 who choose to be treated as U.S. residents for tax purposes can take the standard deduction.

Itemized Deductions

Taxpayers may need to itemize deductions because they can't use the standard deduction. They may also itemize deductions when this amount is greater than their standard deduction. Please see topic “2020 Tax Planning: Itemized Deductions” for update information on itemized deductions.

A taxpayer may itemize deductions for the following items:

• State and local income or sales taxes

• Real estate and personal property taxes

• Mortgage interest

• Mortgage insurance premiums

• Personal casualty and theft losses from a federally declared disaster

• Donations to a qualified charity

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