As the 2023 tax season continues to be underway, Americans all over the country are looking for ways to make their tax filing as accurate as it can be, hoping to pay less taxes or even get a bigger tax refund.
While many opt out to have standard deductions in their yearly tax return, which lowers their taxable income, but for this a taxpayer must itemize them t clearly show them in their paperwork submission to the IRS.
For this, we must first know what a standard and an itemized deduction are and the difference between both.
What is a standard deduction?
A standard deduction equals to an adjustment in your adjusted gross income, with it being the most popular option for Americans, with 87.3% electing it when filing their taxes.
The standard deduction is applied to a taxpayers adjusted gross income, which is easier, but could lead to a smaller refund.
What is an itemized deduction?
In order for an expense to be considered eligible for itemized deduction, an individual must have more than $12,950 dollars in eligible deductions, which would then lead him to have a smaller taxable income amount.
The IRS thinks it’s important for taxpayers to take this into consideration before itemizing any deductions on their filing.
- If a taxpayer won’t be able to use standard deduction, or they’ll limit the amount they can claim.
- Can’t make large contributions to qualified charities.
- Can’t have any other large itemized deductions listed.
- Won’t be able to apply on mortgage interest or real property taxes.
- Large unreimbursed medical or dental expenses can’t be had either.
