Is It Better to Take the Standard Deduction or Itemize My Taxes?

When it’s time to file your taxes, you have two main options to lower your taxable income: take the standard deduction or itemize your deductions. The choice comes down to which option gives you the bigger tax break. Let’s break down how each works and which is best for your situation.

Standard Deduction

The standard deduction is a set amount the IRS allows you to subtract from your income, no questions asked. For 2024, the standard deduction amounts are:

• $13,850 for single filers,

• $27,700 for married couples filing jointly, and

• $20,800 for heads of household.

If your total eligible expenses (like mortgage interest, medical bills, and charitable donations) don’t add up to more than the standard deduction, it’s easier and better to just take the standard deduction. This saves you time and paperwork.

Itemizing Deductions

If your deductible expenses add up to more than the standard deduction, you might save more money by itemizing. This involves listing out each deduction you qualify for. However, not all deductions are unlimited.

For example, as of 2024, you can only deduct state and local taxes (SALT)—including property taxes, income, or sales taxes—up to a maximum of $10,000. This limit might prevent you from reaching the threshold to itemize if you were relying on high property taxes or state taxes to push you over the standard deduction. Before 2018, there was no cap, but now that $10,000 limit is something many people run into.

Here are some other common deductions you can itemize:

• Mortgage interest: If you have a home loan, you can deduct the interest paid throughout the year.

• Medical expenses: You can deduct the portion of medical expenses (like doctor visits, prescriptions, surgeries, and hospital stays) that exceeds 7.5% of your adjusted gross income (AGI). For example, if your AGI is $50,000, only medical expenses over $3,750 can be deducted.

• Charitable donations: Donations to qualified charities are deductible, but be sure to keep detailed records or receipts.

• Casualty and theft losses: In some cases, losses from natural disasters or theft may be deductible if they exceed a certain threshold.

Example:

Let’s say you’re a single filer. If your mortgage interest and property taxes total $12,000 and you paid another $4,000 in medical expenses and charitable donations, your total deductions add up to $16,000. In this case, itemizing would save you more money, since $16,000 is higher than the $13,850 standard deduction. However, if state and local taxes pushed you over the limit and now you can only deduct $10,000 of those, you might fall below the threshold needed to itemize.

Summary

• Itemize if your total deductions (mortgage interest, property taxes, medical expenses like doctors and prescriptions, and charitable donations) add up to more than the standard deduction.

• Take the standard deduction if your itemized expenses are lower—it’s simpler and requires less paperwork.

• Be aware of the $10,000 limit on SALT deductions, which may prevent you from itemizing if high state or property taxes were going to push you over the standard deduction amount.

Every year, you have the flexibility to choose whichever method saves you more money. Your accountant can help you determine if itemizing or taking the standard deduction is the right choice based on your unique situation.