Tax deductions allow you to reduce your taxable income and keep more of your hard-earned money. When it’s time to start your tax return preparation, you must decide whether to take the standard deduction or itemize your expenses. In the past, itemizing was fairly common, but since the new Tax Cuts and Jobs Act substantially increased the standard deduction, it’s become more difficult to determine which strategy is best. Below is an overview of how the two options differ to help you figure out which will be the most financially beneficial for your situation.

A Taxpayer’s Guide to Standard vs. Itemized Deductions 

Standard 

The standard deduction is a fixed amount you can claim for expenses such as medical care, mortgage interest, and charitable contributions. The amount you’re able to deduct is based on your age and filing status. For most taxpayers younger than 65 years old who are filing in 2020, the standard deduction will be $12,200 for singles and married couples filing separately, $18,350 for heads of household, and $24,400 for married couples filing jointly. Generally, taking the standard deduction makes tax return preparation easier and doesn’t require you to keep records or receipts in the event of an audit.

Itemized 

Itemizing your deductions involves listing the actual amount of each expense you’re claiming on a Schedule A form. As such, this requires a bit more work during the tax return preparation process, and you must know which expenses are deductible. It typically makes the most sense to itemize if you own a home, have a significant amount of out-of-pocket medical expenses, live in a high-tax state, or make considerable donations to charity. If you itemize, you’ll need to be prepared to produce proof of your expenses.

To ensure your tax savings are maximized, turn to Burch & Associates for expert tax return preparation. They will thoroughly review your expenses to see if claiming standard or itemized deductions will be most effective at lowering your tax bill. Over the years, countless individuals and businesses in Lancaster County, NE, have relied on them for professional, accurate, and affordable tax services. Call (402) 483-4791 to schedule an appointment or visit their website for more information on what they offer.