When it comes to navigating the complexities of tax season, one of the key decisions taxpayers face is whether to take the standard deduction or itemize their deductions. In most cases, opting for the standard deduction is the simpler and more beneficial choice for the majority of filers. The standard deduction for the current tax year stands at $13,850 for single filers and $27,700 for married couples.
However, there are situations where itemizing deductions may be advantageous, particularly if the total itemized deductions exceed the standard deduction amount. Deductions that can be itemized include state and local income taxes, property taxes, mortgage interest, charitable contributions, and certain medical expenses.
For individuals who are claimed as dependents on another taxpayer's return, itemizing deductions may be necessary if their standard deduction is limited. Additionally, self-employed individuals and business owners have specific deductions to consider, such as business expenses, mileage for business use of a car, home office deductions, and retirement fund contributions.
It's important to understand the distinction between above-the-line and below-the-line deductions. Above-the-line deductions can be claimed without itemizing and are available even when taking the standard deduction. Examples include student loan interest and educator expenses. On the other hand, below-the-line deductions, like mortgage interest and medical expenses, are only accessible through itemizing deductions.
Individuals should also explore state-specific deductions that may be available to them, such as instructional materials credits for teachers. These credits can directly reduce the final tax bill, unlike deductions that lower taxable income.
Ultimately, the key to maximizing deductions lies in understanding the expenses that qualify and keeping detailed records to support those deductions. Whether opting for the standard deduction or itemizing, taxpayers can benefit from exploring all available deductions to minimize their tax liability.
For more tax season coverage and insights, visit the AP's tax season coverage.
