When it comes to tax preparation, there are a lot of important decisions to make. One choice taxpayers face is whether to take a standard or itemized deduction. While the standard deduction is the simpler option, you can save more money by itemizing. The following information can help you make the right decision. 

Standard Deduction

The standard deduction is designed to be simple and straightforward in terms of tax preparation. Your adjusted gross income factors how much you owe in taxes. When claiming the standard deduction, you reduce your adjusted gross income, which reduces taxes you owe. 

Most people are eligible to claim the standard deduction. For 2020, the standard deduction amounts are $12,400 for individuals, $18,650 for heads of households, and $24,800 for married couples filing jointly. Exceptions include filing on behalf of a trust or partnership, and a spouse who itemizes while elected as married; however, both spouses must itemize on their individual tax returns. 

Itemized Deductions

Itemizing your deductions also decreases your adjusted gross income. Unlike the standard option, the process for itemizing is usually more extensive. However, taxpayers can deduct items such as charitable contributions, certain medical costs, mortgage payment and student loan interest, property taxes, retirement account contributions, and self-employment expenses.

Taxpayers that meet the requirements for these deductions benefit by itemizing. For example, since charity donations can be elected, multiple contributions within a given year are worth itemizing. Similarly, it’s ideal to itemize other deductions if you qualify for them.

For other tax preparation questions, contact Bergamo Tax & Financial Solutions in Watertown, CT. With 25 years of service, this small, family firm focuses individual attention on each client to provide insight into complex tax problems. Call (860) 274-1655 to schedule an appointment with an accountant or visit them online to learn more about services.