Should I Take the Standard Deduction?

Deciding whether or not taking the standard deduction is right for you will depend on your individual situation and if you have a large number of deductible expenses such as a mortgage, sizeable medical bills, or are self-employed.

OCTW3BLOG1

If you do not have a large number of deductible expenses to itemize, the standard deduction ($12,550 for individuals or $25,100 for married couples filing jointly in 2021) likely makes the most sense for you. If however you are self-employed with deductible expenses, have high medical bills, or have made large donations to charity, itemizing may make more sense for you.

Here are some factors to consider:

  1. Standard Deduction Amount: Determine the standard deduction amount for the tax year. This amount varies depending on your filing status. As of my knowledge cutoff in 2021, the standard deduction amounts for the 2021 tax year are as follows:

    • Single: $12,550
    • Married filing jointly: $25,100
    • Head of household: $18,800
    • Married filing separately: $12,550
  2. Itemized Deductions: Itemizing deductions allows you to claim specific expenses, such as mortgage interest, state and local taxes, medical expenses, and charitable contributions. To determine if itemizing is beneficial, add up your eligible deductions and compare the total to the standard deduction amount. If you do plan to itemize, be sure to keep clear records detailing your deductions as well as your receipts.

  3. Financial Situation: Consider your financial situation. If your total itemized deductions are less than the standard deduction amount, it may be more advantageous to take the standard deduction. However, if your itemized deductions exceed the standard deduction, itemizing may result in a lower tax liability.

  4. Documentation: Keep in mind that itemizing deductions requires more documentation and record-keeping. You need to maintain accurate records and receipts to substantiate your deductions in case of an audit.

  5. State Taxes: Remember to consider your state tax situation as well. Some states have their own standard deduction amounts, which may differ from the federal standard deduction. You may need to itemize on your federal return but take the state standard deduction.

It's a good idea to consult a tax professional like Peter Witts CPA PC to determine which option is more advantageous for your specific circumstances. They can help you navigate the tax code and identify potential deductions that may apply to you.

Kristin-w-background-2

I’m Kristin, the PWCPA PC Customer Success Specialist. For more information about this topic, or any other, you can always reach me through our customer ticketing system.