Itemizing deductions and the standard deduction have a long history in the United States tax code. While standard deduction is the optimal choice for most taxpayers, it’s best to check whether it can benefit you.
The same as any other tax year after the TCJA of 2017, we expect an increase in the standard deduction for the 2022 tax season. The increases in standard deduction amounts for all taxpayers only make it more feasible while the number of taxpayers itemizing deductions degrades.
As there is no definite answer to whether or not you should itemize deductions in 2022, you need to see it for yourself. The most common deductions are for the qualifying medical expenses, state and local taxes (SALT), mortgage interest paid, losses, and charitable contributions. If you’ve paid a large portion of your income in the above expenses, there is a good chance that your itemized deductions are going to exceed the standard deduction you’re allowed to take. So, you need to see it for yourself to see if it makes sense to itemize deductions or not.
Itemizing deductions as a business owner
It makes more sense to itemize deductions as a business owner (sole proprietor) because every dime you spend on your business is pretty much deductible. Taking advantage of these expenses gives you a huge boost over the standard deduction. Even your rent expenses can be more than the standard deduction you’re given. Itemizing deductions is a major consideration for entrepreneurs operating their own businesses.
Itemizing deductions as an employee
While you won’t get the same benefits as a business owner would if you were to itemize deductions because you don’t have the same types of expenses, nevertheless, itemizing can be beneficial even more so. Having certain expenses like a mortgage, out-of-pocket expenses for qualifying medical expenses, and other deductible common expenses can grant you a reasonable deduction amount.
The bottom line is regardless of your situation, always check to see if your itemized deductions can reduce your taxable income more than the standard deduction you get would. Plenty of free tax tools can help you figure out which helps you pay less tax.