The standard deduction will vary year to year depending on your filing status. The fixed number, determined by the tax year, reflects the dollar amount that reduces the income you’re taxed on.
In 2015, the standard deductions were:
Single/Married Filing Separately — $6,300
Married filing jointly or qualifying widow(er) — $12,600
Head of household — $9,250
Most (around two - thirds) of tax returns will claim the standard deduction. The benefits of using the standard deduction for your taxes include:
- allows a deduction even without expenses that qualify for claiming itemized deductions
- no need to itemize deductions
- avoids the need to keep records + receipts for IRS audit purposes
Similarly to the standard deduction, itemized deductions reduce your taxable income. However, itemized deductions require more information.
You might see itemizing your deductions as beneficial if:
- your itemized deductions > the standard deduction you’d receive
- you had large medical/dental expenses
- paid mortgage interest and real estate taxes on your home
- had large business expenses or unreimbursed expenses as an employee
- had theft, natural casualty losses in your immediate family
- donated sizable dollars to charities
- had unreimbursed miscellaneous expenses
If you calculate your itemized deductions and it is less than your standard deduction you might want to consider taking the standard deduction. However, in some cases there is a benefit to itemize deductions even if your itemized deductions are less than the standard deduction. For example - you might choose to do this if you would end up paying less tax by itemizing on a state return in order to get a larger tax benefit than if you would file the standard deduction on your federal tax return.
At Sorge CPA we can help go through your tax return line by line to make sure that your are filing the appropriate deduction method for your unique case.