S is for Standard Deduction.
Most taxpayers have the option of claiming the standard deduction or the itemized deduction. I say “most” because, as with almost everything tax-related, there are some exceptions. You cannot use the standard deduction if you file as married filing a separate return and your spouse itemizes deductions; you are a nonresident alien or a dual-status alien during the year; or you are filing a tax return for a period of less than 12 months because of a change in your annual accounting method.
As you can imagine, those exceptions only affect a handful of taxpayers. The rest of us must make a decision to file using the standard deduction or itemized deductions.
For the tax year 2011, the standard deduction for single taxpayers or for those married filing separately is $5,800; for married taxpayers or qualifying widow(er)s, the standard deduction is $11,600; and for head of household, the standard deduction is $8,500.
Again, there are some more exceptions. You are entitled to a higher standard deduction if you are age 65 or older at the end of the year (and don’t ask why but for this purpose, you are considered 65 on the day before your 65th birthday). If you are blind on the last day of the year, you are also entitled to a higher standard deduction.
Two-thirds of all taxpayers will claim the standard deduction.
Now, the math. If your total deductions on Schedule A exceed the standard deduction for your filing status, you can claim that amount instead – these are your “itemized deductions.” The home mortgage interest deduction tends to be the reason for many taxpayers to opt for itemized deductions. Interest can pile on pretty quickly and together with other deductions, can edge you over the standard deduction limit.
The home mortgage interest deduction isn’t the only deduction available on Schedule A. Also included are medical and dental expenses; taxes paid (including state and local income or sales taxes); charitable gifts; casualty and theft losses; and job expenses and miscellaneous deductions (including tax preparation fees; investment fees, safe deposit fees).
Add all of those expenses together to figure your itemized deductions. If the total of those deductions exceeds the standard deduction for your filing status, you will (in most cases) want to claim itemized deductions instead of claiming the standard deduction. Conversely, if the total of those deductions is less than the standard deduction for your filing status, you will want to claim the standard deduction.
If you’re not sure whether you’ll want to take the standard deduction or the itemized deduction, and the math in your head makes it seem too close to call, run the numbers and see which is the most beneficial. If you’re using tax software, that should be pretty simple; ditto if you’re using a tax preparer.
Note: The TCJA made changes to many tax deductions previously available on Schedule A, including miscellaneous deductions that exceed 2% of your adjusted gross income (“AGI”). This is applicable for the years 2018-2025.
