Deductions are a crucial component of the tax code, allowing Americans to minimize their liability by reducing their total amount of taxable income. In most cases, they are based on specific purchases you’ve made throughout the year, which can be itemized on your tax return. However, the code also gives every taxpayer a standard deduction, which you can use even if you haven’t made many deductible purchases. Understanding the difference between itemized and standard deductions before starting tax return preparation is key to lowering your tax bill.

The Standard Deduction

The code allows every taxpayer to exempt a certain amount of income from income taxes. The amount of the standard deduction varies, depending on your filing status, disability, and several other factors. The 2017 tax reform bill nearly doubled the amount of the standard deduction, up to $12,000 for single taxpayers or $24,000 for married couples filing a joint return. This raise makes the standard deduction a better deal for most taxpayers, even if you used to itemize.

Itemized Deductions

Taxpayers who made significant deductible purchases throughout the year may be better off itemizing their deductions instead. Contributions to qualifying charities, mortgage interest payments, business expenses, and some investments in your home can all be deductible under some circumstances. However, the Tax Cuts and Jobs Act eliminated many of the deductions most taxpayers relied on, so under the new rules taking the standard deduction may be the better choice. Before filing your taxes, it’s best to consult with a tax return preparation professional who will help reduce your exposure as much as possible.

With over 15 years of experience and an in-depth understanding of the code, Joe Heard, CPA provides personalized tax return preparation services to individuals and businesses throughout Checotah, OK. With his resources, expertise, and dedication to his clients, rely on his team to ensure you get every deduction you qualify for to reduce your tax burden as much as possible. Visit their website for more on their tax return preparation services or call (918) 473-1492 to make an appointment today.