You decide between the standard deduction and itemizing by comparing two numbers: the standard deduction for your filing status, and the total of your itemized deductions on Schedule A. The IRS says you should itemize when your allowable itemized deductions are greater than your standard deduction, or when you are required to because you cannot use the standard deduction. Many taxpayers take the standard deduction because it needs no receipts, but itemizing can win when you have a sizable mortgage, high state and local taxes, large charitable gifts or big medical costs. This article covers US federal rules in general terms.
Standard deduction amounts are adjusted by law and change over time, so this page does not quote one. Look up the current figure for your filing status in the Form 1040 instructions or on the IRS site.
What each option does
A deduction reduces taxable income, the amount that is run through the tax brackets. You get one or the other, not both. The IRS puts it plainly: you cannot take the standard deduction if you itemize.
- The standard deduction is a fixed amount set by law. It depends on filing status, and extra amounts apply if you are 65 or older or blind.
- Itemized deductions are specific expenses listed on Schedule A, such as state and local taxes, mortgage interest, charitable gifts and medical expenses. You can claim only what you can document, and many categories have limits.
Some deductions, often called adjustments to income, are available whether or not you itemize. Student loan interest and certain retirement or health savings account contributions are examples, subject to their own rules. They are separate from this choice.
Who cannot take the standard deduction
The IRS lists several cases where the standard deduction is not available. The one that matters most to many couples is this: if you are married filing separately and your spouse itemizes, you generally cannot take the standard deduction. Couples considering separate returns should work through both returns together, ideally with a tax professional.
The IRS also notes that you may want to itemize if your standard deduction is limited because someone else can claim you as a dependent.
The comparison in practice
Add up your Schedule A categories, then compare the total with your standard deduction. Only the amount by which itemizing beats the standard deduction produces extra savings. If your itemized total is below the standard deduction, the standard deduction is simply larger and wins.
Tax software compares the two for you once you enter your expenses. A quick manual check is also easy: write your standard deduction on one line, the Schedule A total on the next, and take the bigger.
The main itemized categories
State and local taxes
You can generally deduct state and local income tax or sales tax, plus property tax, but the total is subject to a cap. Congress has changed that cap in recent years, so check the Schedule A instructions for the current limit. In high-tax areas the cap is easy to reach, and in low-tax areas this category is often small.
Mortgage interest
Interest on a home loan may be deductible, subject to limits on the loan amount. Early in a mortgage most of each payment is interest, so the deduction is largest in the first years. Your lender reports it on Form 1098.
Charitable gifts
Cash and property given to qualifying organizations may be deductible. Keep written acknowledgments, especially for larger gifts, and records of noncash donations. Gifts of appreciated assets have their own rules, so check the IRS guidance on charitable contributions first.
Medical and dental expenses
You can deduct unreimbursed medical costs only to the extent they exceed a set percentage of your adjusted gross income. That percentage is stated in the Schedule A instructions, so check it for the year you file. Because of that floor, medical expenses help only in years with large bills.
Other items
A few less common items exist, such as disaster losses and certain gambling losses. They have specific rules, and the Schedule A instructions and Publication 17 explain them.
Special cases worth knowing
Age and blindness can raise your standard deduction, and the IRS publishes the additional amounts each year. Dependents have a more limited standard deduction, based on earned income up to the normal amount for their filing status, so a teenager with a summer job should check the instructions instead of assuming the full amount. Some taxpayers, including nonresident aliens in most cases, and people filing for a short year because of an accounting period change, cannot take the standard deduction at all. If any of these describe you, read the Form 1040 instructions or ask a tax professional before relying on a general rule.
Why most people take the standard deduction
When the standard deduction is large relative to your expenses, itemizing adds work and risk without adding savings. Taking the standard deduction is faster, needs fewer records and leaves less room for errors. If your itemized expenses are not clearly larger, the standard deduction is usually the practical choice.
Situations where itemizing often wins
Itemizing tends to come out ahead when several of these apply:
- You pay mortgage interest on a sizable loan.
- You live where state income or property taxes are high.
- You give a lot to charity.
- You had large unreimbursed medical bills in the year.
- You file separately and your spouse itemizes, which generally forces you to itemize too.
Bunching as a planning idea
If your itemized total hovers near the standard deduction, some people use bunching: concentrating two years of a flexible expense, such as charitable giving, into one year. In the bunching year you itemize, and in the other year you take the standard deduction. The benefit is real but modest, and it makes sense only if you were already planning to give. A donor-advised fund is one way some people do this, but a fund has its own rules and fees, so read the terms or ask a professional first.
Documents to gather before deciding
- Form 1098 for mortgage interest, and property tax bills if you pay them directly.
- Records of state income tax paid, or sales tax.
- Charitable receipts and bank records.
- Medical bills and insurance statements.
The full list of forms is in what documents you need before filing taxes. If your records are scattered, how to organize tax records throughout the year makes this decision much faster.
Traps
- You cannot mix the two. Itemizing means giving up the standard deduction entirely.
- Itemizing takes effort. More forms and more records.
- Spending to deduct is a poor trade. A deduction only reduces tax by part of what you spend.
- Changing your mind later. Switching after filing generally means an amended return, and some cases limit your choice.
- State returns differ. Some states require the same method as your federal return, and others let you choose separately.
- Withholding. Your choice affects your final tax and therefore your needed withholding. See how to adjust your withholding after a big refund if your numbers changed.
For a close call, a Volunteer Income Tax Assistance site or a qualified tax professional can run both calculations with you.
Where this comes from
This article is based on the IRS topic pages on the standard deduction and on itemized deductions, which refer readers to the Instructions for Schedule A and Publication 17. It deliberately gives no dollar figures or percentages, because they change. Check the current figure at irs.gov (IRS) or in the form instructions.