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Standard Deduction vs. Itemized Deduction: Which Should I Choose?

Tax season is here, folks! Try not to get too excited.  

Let’s face it—tax season may not be the most wonderful time of the year, but one thing to help soften the blow of paying taxes is choosing which deduction will let you keep more of your hard-earned money. And more money means more momentum for kicking debt to the curb and building some serious wealth!

So here’s the 411. When it comes to tax deductions, the IRS gives you two options: take a simple standard deduction or put in a little extra work to claim itemized deductions. You can only choose one. So it’s important to pick the one that will lower your taxable income the most.

The difference between a standard deduction and an itemized deduction is that a standard deduction is a lump sum you can subtract from your taxable income, but an itemized deduction is an expense you can subtract from your taxable income.

Still unclear?

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Think of a standard deduction as an automatic tax freebie that’s based on your filing status: single, married or head of household. No adding and subtracting from a pile of receipts necessary! It’s the automatic transmission of tax deductions: simple and easy to manage.

Choosing to itemize your deductions instead is like shifting into manual drive. It’s going to take some extra effort on your part, but if you’ve had some big out-of-pocket medical expenses and charitable donations this year (we mean big), it could be worth it to itemize. We’ll take a look at those expenses that qualify for itemizing in just a bit.

What Is a Standard Deduction?

A standard deduction is a lump sum you can subtract from your taxable income when you file your taxes.

With the standard deduction, you don’t get to choose the amount deducted, but you also don’t have to mess with all the receipts and calculations that itemized deductions require.

What Is an Itemized Deduction?

An itemized deduction is a qualified expense you can subtract from your taxable income to lower your tax burden.

The number of qualified expenses you can itemize and their dollar amounts will vary for you each year. So choosing the itemized deduction means some extra planning, adding and subtracting on your part, but as we’ll see, it might be worth your time!

common itemized deductions

When Should I Take the Standard Deduction?

Take the standard deduction when it’s larger than your itemized deductions. It’s as simple as that.

Now, figuring out your itemized deductions isn’t always simple—it’ll take some legwork. But once you’ve got that amount, you can just compare it to the standard deduction and pick the bigger number.

Since Congress nearly doubled the standard deduction back in 2017, the vast majority of taxpayers (87%) choose the standard deduction’s set dollar amount over itemizing.1 And the good news is the Tax Man has increased the standard deduction for the 2022 and 2023 tax years because of inflation. Hurray! The bad news is . . . the Tax Man. And inflation.

Let’s look at the numbers.

Standard Deduction

Filing Status

2021

2022

2023

Single

$12,550

$12,950

$13,850

Married Filing Jointly

$25,100

$25,900

$27,700

Married Filing Separately

$12,550

$12,950

$13,850

Head of Household

$18,800

$19,400

$20,8002,3

For 2022, the standard deduction is $12,950 for single tax filers, $25,900 for married filing jointly, $12,950 for married filing separately, and $19,400 for head of household.4

It seems like a no-brainer to take the standard deduction. (Less paperwork and hassle during the already-busy tax season? That’s a win-win. Sign me up!) So why would someone choose to itemize?

A few things to keep in mind:

  • If you’re blind or over the age of 65, you get a higher standard deduction. It increases by $1,750 for single or head of household or $1,400 for married filing jointly.5 If you’re both 65 and blind, the additional deduction is doubled.
  • The standard deduction is much higher than it was a few years back. Congress nearly doubled the standard deduction when it passed the Tax Cuts and Jobs Act in 2017. Each year, the IRS bumps up the standard deduction a little bit to adjust for inflation.
  • You can’t use the standard deduction if you’re married filing separately and your spouse itemizes. So you and your spouse need to get on the same page about which deduction will work best for you! Also, if someone can claim you as a dependent, your standard deduction will be lower.

When Should I Itemize My Deductions?

It’s simple—Itemize your deductions when they’re larger than the standard deduction.  

Let’s say, for example, you have a home mortgage and paid a lot of interest this year. You also had some major unexpected out-of-pocket medical and dental expenses. In that case, your itemized deductions might add up to more than the standard deduction you would qualify for. Then it would absolutely be worth the extra time and paperwork involved to get a total on those expenses and see if the amount you can deduct for them adds up to more than your standard deduction. If they do, claim those itemized deductions!

If your itemized deductions add up to even slightly more than the standard deduction, you’ll see a difference in your tax bill. Let’s say you’re married filing jointly, and you itemize $26,900 in deductions. That’s $1,000 more than the standard deduction, but that doesn’t mean you’ll save $1,000 in taxes. Remember, deductions are subtracted from your taxable income.

In this example, itemizing deductions reduced your taxable income by $1,000. If you’re in the 22% tax bracket, that’s a tax savings of $220. For every dollar you deduct from your taxable income, you lower your tax bill by 22 cents. Not too shabby!

Expenses That Qualify as Itemized Deductions

Does the example above sound familiar to your situation? If so, let’s take a closer look at the kind of expenses that qualify for deduction. Here’s a breakdown of some of the most itemized deductions:

Mortgage Interest

The IRS allows you to deduct mortgage interest on the first $750,000 ($375,000 if married filing separately) of your mortgage if you took it out after December 16, 2017.6

If you took out your home loan before December 16, 2017, you have a higher limitation of $1 million ($500,000 if married filing separately).7

Charitable Donations

Did you stretch your giving muscle this year? Good for you! Who doesn’t love a cheerful giver? If you donated cash or property to nonprofits, like a community food bank, church or disaster relief fund, you can itemize those donations up to 60% of your taxable income.8

If you give cash, make sure you keep receipts and paperwork. To deduct a cash donation of over $250, you’ll need a receipt and a letter from the organization as documentation.9 As usual with taxes, planning and organization is key.

Medical Expenses

Root canal, anyone? Hopefully not, but if you made more visits to your friendly neighborhood dentist this year than you originally planned, good news. You can deduct any out-of-pocket medical or dental expenses that exceed 7.5% of your adjusted gross income (AGI).10

For example, if your AGI is $60,000, multiply that by 7.5% to see how much your out-of-pocket expenses have to be to qualify for this deduction. The answer is $4,500, so if you paid $5,025 out of pocket for your very expensive root canal, you could add the difference—$525—to your list of itemized deductions.

State and Local Taxes

The State and Local Tax Deduction (SALT) allows you to deduct up to $10,000 ($5,000 if married filing separately) of your state and local property taxes, as well as your state income or sales taxes.

Wait, did you catch that? It’s either state and local income taxes or state and local sales tax, but not both! Uncle Sam isn’t that generous. You can combine property and sales taxes or you can combine property and income taxes, but not all three.11

So let’s wrap it all up:

  • Single or married and filing separately: Only itemize your deductions if they add up to  more than the standard deduction of $12,950.
  • Married filing jointly: Only itemize your deductions if they add up to more than the standard deduction of $25,900.
  • Filing as head of household: Only itemized your deductions if they add up to more than the standard deduction of $19,400.

If you’re still on the fence about whether or not to itemize, go ahead and plug the numbers into your tax-filing software or check with a tax pro to see which scenario will save you the most money.

Other Tips to Get You Through Tax Season

Tax season 2023 is here whether we like it or not, and the big deadline to file your taxes is April 18, 2023. But the sooner you start preparing for tax time, the better. As you receive interest statements, 1099s, W-2s and other documents, file them together in a safe place so they’ll be right at your fingertips when you start working on your taxes. Your future tax-season self will thank you!

If you’ve ever spent an hour digging through desk drawers and coat pockets searching for a missing receipt, you know the importance of keeping good, organized records. And that’s what it takes to itemize deductions when you file your taxes. Tax time is stressful enough. Don’t add additional stress to your life by waiting until the last minute.

Get Help With Your Taxes

If your taxes are pretty straightforward and you want an easy-to-use tax software that can give you some peace of mind, check out Ramsey SmartTax! No hidden fees, no upcharges, no games. That’s how it should be!

But what if you have a more complicated tax situation? In that case, working with a pro is a smart move. And if you’re looking for a tax expert you can trust, our RamseyTrusted tax pros have years of experience and can help you file your taxes with confidence. Find a tax pro today!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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