What is a Standard Deduction?
A standard deduction is a deduction that reduces the amount of income subjected to taxes and is available to nearly everyone who files income taxes in the United States. Generally, the deductions available are standard and itemized. A number of expenses may be subjected to itemized deductions that would reduce the amount of income subjected to taxation even more so than a standard deduction. However, whether an individual should itemize depends solely on the circumstances involved.
The standard deduction, according to the Internal Revenue Service, is the most common option chosen. It is definitely an easier option, though some may be paying more money than they need to pay to the IRS by choosing this method. Still, some choose convenience over reduced tax obligations. Choosing a standard deduction means there is no need to add, keep track of receipts and try to justify every expense as one that should be itemized.
The key to determining whether to take a standard deduction or whether to itemize is first to determine whether the standard deduction amount is greater than itemization would be. For most people, the standard deduction makes the most sense. Couples can take more than $10,000 US Dollars (USD) for a standard deduction, and the amounts can be adjusted annually. If an adjustment does take place for the standard deduction, it is because the amount is increased.
When choosing between a standard deduction and itemization, it is therefore necessary to look at which expenses may be included in itemization. Interest on home mortgages is one thing that can be itemized. Medical expenses can also be itemized, once those expenses reach a certain percentage of income. A number of other miscellaneous, work-related expenses can also be deducted.
The benefit of taking the standard deduction are numerous. First, there is no worrying about what may or may not qualify for a deduction. Second, there is a considerable time savings. Third, those taking the standard deduction can often save the expense of having a tax return professionally prepared. Lastly, returns with taking the standard deduction option are less likely to be audited.
It should also be remembered that a standard deduction is more for some senior citizens or those who are disabled. This may also play a role in which deduction is taken. Some may forget this is an additional deduction added on to the standard deduction and thus payer a higher amount of tax than is necessary.
Written by Ken Black
