The standard deduction and itemized deduction are a never-ending tale. Which one you should claim on your federal income tax return depends on a few principle factors like your expenses and filing status. Find out if you should take the standard deduction or itemize deductions in the 2022 tax season.
What is the standard deduction?
For complete beginners, the standard deduction refers to the deduction amount set by the federal government that every taxpayer can claim. It’s the most commonly claimed tax deduction for federal income tax purposes. The 2022 amount is anticipated to be between $12,750 for single filers and double for married taxpayers filing a joint return.
What are the itemized deductions?
Rather than taking the deduction set by the federal government, taxpayers also have the option to write off a certain amount for their qualifying expenses. For example, the majority of medical costs are deductible. If your itemized deductions exceed the standard deduction for the tax season, you should always itemize as it means you’re going to pay less tax.
How to choose one over another?
The most straightforward way to decide whether to itemize or take the standard deduction is to try both. Take a look at your qualified expenses and add up all the itemized deductions you can claim on Schedule A. If your itemized deductions exceed the standard deduction, itemize. If not, take the standard deduction. It’s as easy as it gets.
Understanding what you can and can’t itemize
With hundreds of itemized deductions that you can claim on your federal income tax return, it can get tricky to find each item you can itemize. But, there is an easy way to do that also. Whether in the office or a piece of software, the tax preparation services can help you with that.
Considering that minor changes are also made for every tax season, you would have to be a tax consultant to know every deduction. However, you’ll need to pay for these services. Though you may not want to spend at first, paying for such services can help you pay less tax. In comparison, there is a high chance that you will end up with a higher tax bill if you weren’t to pay that.
Picture this: you pay $100 for a tax preparation service and save more than $100. You could end up with a tax bill a lot higher if you weren’t to pay for it. The tax preparation services can help you cut down your liability while saving you time.
While these are beneficial, it isn’t for everyone. If you had minimal spending and the majority of your expenses were for basic costs, and you save up for retirement, the standard deduction is going to be a better option. Nevertheless, calculate the both and make your mind on whichever benefits you the most.