Itemized vs. Standard Deduction

It's easy to decide whether to itemize your deductions or take the standard deduction -- figure out what itemized deductions you can take and add them up. If the total is more than the standard deduction for your filing status, then itemize your deductions.

Individuals (or couples filing jointly) filing tax returns in the United States are allowed a choice when preparing their Federal income tax returns. After computing their Adjusted gross income (AGI), taxpayers can itemize their deductions (from a list of allowable items) and subtract those itemized deductions (and any applicable personal exemption deductions) from their AGI amount to arrive at their taxable income amount. Alternately, they can elect to subtract the standard deduction for their filing status (and any applicable personal exemption deduction) to arrive at their taxable income. In other words, the taxpayer may generally deduct the total itemized deduction amount, or the standard deduction amount, whichever is greater.

The choice between the standard deduction and itemizing involves a number of factors:

The terms standard deduction and itemized deductions are important aspects of tax law. A proper calculation of both could clearly help reduce the tax you owe. You can choose to itemize your deductions or take the standard deduction - but not both.

Standard deduction is a specific dollar amount that you can deduct from your income to reduce your taxable income. The amount of standard deduction depends only on your filing status and is increased every year to adjust for inflation. You are eligible for standard deduction if you have not itemized your deductions and you are either a US citizen, a resident alien (married or single), or a head of a household. Non-resident aliens are not eligible for standard deduction. You may be eligible for higher standard deduction amounts if you meet certain special criteria e.g. you are blind or over 65 years of age.

Itemized deductions, on the other hand, are expenses which one can list if these expenses belong to a predetermined list of allowable items. The allowable items include payments to doctors, medical insurance premiums, cost of medical equipment and many more. There are differences between the two, and understanding them is imperative in deciding the exact amount of taxable income to be declared.

Comparison chart

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Itemized Deduction

Standard Deduction

Schedule A required? Yes No
Can use 1040EZ? No Yes
Eligibility All tax filers are eligible to itemize their deductions. Non-resident aliens cannot claim the standard deduction.
Procedure Complete form 1040 and associated schedule A. Provide documentation for the items being deducted from taxable income. You cannot use Form 1040EZ when itemizing deductions. Schedule A is not required and no documentation is necessary when claiming standard deduction.
Relation to AMT (Alternative Minimum Tax) Some categories of expenses that can be itemized reduce income subject to AMT The standard deduction does not reduce the income subject to AMT
Documentation Requirement Each itemized deduction requires appropriate documentation. No documentation is required for claiming the standard deduction.
Available to Nonresident aliens? Yes No

Contents: Itemized vs Standard Deduction

edit When to Itemize Deductions

edit Standard Deduction Amounts

The applicable standard deduction amounts for tax year 2013, for which the return must by filed by Apr 15, 2014, are as follows:

Filing status Standard Deduction Amount
Single $6,100
Married Filing Jointly $12,200
Married Filing Separately $6,100
Head of household $8,950
Qualifying widow(er) $12,200
Additional Amount if Blind $1,200 (for married filing joint, married filing separately, or qualifying widow); $1,500 (for single and head of household)
Additional Amount if age 65 or older $1,200 (for married filing joint, married filing separately, or qualifying widow); $1,500 (for single and head of household).

edit Expenses that can be itemized

Itemizing deductions would generally be more advantageous if the sum of all itemizable expenses works out to be greater than the standard deduction for the corresponding filing status. The following set of expenses can, in general, be itemized:

edit Eligibility

Standard deductions can be applied only if one is eligible for it. For example, non-resident aliens are not eligible for standard deductions. Added benefits are given for the visually challenged and senior citizens (over 65 years old) in standard deductions, whereas there are no such provisions in itemized deductions.

edit Restrictions

Itemized deductions pose some restrictions. If you are married and are filing your returns separately, both spouses must make the same choice i.e. you are required to itemize your deductions if your spouse does so. Tax filers are required to maintain records and evidence supporting their itemized deductions. No such substantiation is required for standard deductions.

edit Utility

Since the standard deduction is based on the filing status, no adjustments can be performed by the IRS until the filing status changes. Therefore if the standard deductions and the itemized deductions amount to the same value, its better to opt for the standard deductions to avoid any adjustments or having to provide proof. However, if you are subject to AMT (alternative minimum tax), you will save more by itemizing rather than opting for standard deductions even if the amount of itemized deductions is low. The reason for this is that standard deductions don't reduce income subject to AMT while some specific categories of itemized deductions can.

edit Procedure for claiming standard or itemized deductions

Itemized deductions require the tax filer to fill and submit Schedule A and the long form 1040. In Tax filers are also required to provide proof such as invoices and payment receipts for the deductions being itemized. There are no such procedures required for claiming the standard deduction.

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