When you prepare and e-File your Tax Return via eFile. Based on the tax information you enter during the tax interview, the eFile Tax App will suggest the best deduction method to you, as we want you to keep more of your hard earned money.
It's that simple. Whether to apply the standard deduction or itemized deduction method on a tax return is a confusing decision for most taxpayers. Have no fear, we are here to make it easy for you! The general rule of thumb is, if the standard deduction amount for your filing status is greater than your total itemized deductions, then you should take the standard deduction.
Otherwise, you should claim itemized deductions on your tax return. Again, when you prepare your return on eFile. Once you have prepared your return, you can view the results and see which method was chosen for you.
If you need to change it for other reasons, it is simple to change it as well. With tax reform and the increased standard deduction amounts, the standard deduction will be the best choice for a lot of folks.
Every year it's up to you to decide whether you should you itemize or take the standard deduction. The standard deduction is a specified dollar amount you are allowed to deduct each year to account for otherwise deductible personal expenses such as medical expenses, home mortgage interest and property taxes, and charitable contributions.
You take the standard deduction instead of deducting your actual personal expenses. The amount you are allowed to deduct depends on your filing status and is adjusted for inflation each year. The TCJA roughly doubled the standard deduction starting in The IRS website has information on the current year standard deduction amounts. Instead of taking the standard deduction, you always have the option of itemizing your deductions.
This means you individually deduct the actual amounts of certain expenses item by item instead of taking the standard deduction. This is a lot more work than taking the standard deduction. You have to know what expenses are deductible and keep track of them. You also need to keep records of your expenses. Cancelled checks or credit card statements are not enough—you need to keep receipts and other bills showing what you spent the money on. Itemized deductions are usually personal in nature, and don't include business expenses.
Some of the more common ones are:. The largest of these deductions are those for home mortgage interest, property taxes, and state income tax. When you itemize deductions, you are listing expenses that will later be subtracted from your adjusted gross income to reduce your taxable income. If your expenses throughout the year were more than the value of the standard deduction, itemizing is a useful strategy to maximize your tax benefits.
Keep in mind that not all expenses qualify when you itemize. Itemized deductions include products, services, or contributions that have been approved by the IRS. In brief, things you can deduct include:. Itemized deductions are called below the line deductions because they are subtracted from your adjusted gross income. Tax Deductions for Retirement Savings. Table of Contents Expand. Standard vs. Itemized Deductions. Purpose of Itemizing. Deductions You Can Itemize. Income Limitations. Remember to Aggregate.
The Bottom Line. Key Takeaways Itemized deductions help some taxpayers lower their annual income tax bill more than the standard deduction would provide. The surviving itemized deductions include several categories like medical expenses, mortgage interest, and charitable donations.
Itemizing most often makes sense for higher-income earners who also have a number of large expenses to deduct. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
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Related Articles. Partner Links. Itemized Deduction Itemizing deductions allows some taxpayers to reduce their taxable income, and thus their taxes, by more than if they used the standard deduction.
Mortgage Interest Deduction A mortgage interest deduction allows homeowners to deduct mortgage interest from taxable income. Read who benefits from a mortgage interest deduction.
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