Standard Deduction versus Itemized Deductions

There are many deductions and credits on the individual tax return. One of the biggest deductions is the standard deduction. However, if you have certain itemized deductions that in total exceed the standard deduction amount, you can take that higher deduction instead.

2020 Standard Deduction Amounts (Based on your filing status)

  • Single or Married Filing Separately - $12,400

  • Married Filing Jointly or Qualifying Widower - $24,800

  • Head of Household - $18,650

  • Age 65+ and/or Blind (additional deduction with the above deduction)

    • Married Filing Jointly, Qualifying Widower, or Married Filing Separately - $1,300 additional amount

    • Single or Head of Household - $1,650 additional amount

  • Dependent – standard deduction cannot exceed the greater of $1,100 or earned income plus $350

Itemized Deductions

Taxpayers must choose between taking the standard deduction shown above or taking itemized deductions. However, in some scenarios, the taxpayer doesn’t have a choice.

Medical Expenses

Eligible medical and dental expenses must exceed 7.5% of adjusted gross income (AGI). For example, if an individual has an AGI of $40,000, only the medical expenses that exceed $3,000 (40,000 X 7.5%) would be deductible. If that individual had $10,000 medical expenses, then $7,000 (10,000 – 3,000) would be deductible.

Taxes Paid

This includes state and local income tax, real estate and property taxes, and sales tax paid in that calendar year.

Interest Paid

Home mortgage interest is deductible, subject to limits.

Charitable Contributions

Charitable contributions are deductible but limited to 100% of adjusted gross income (AGI). This means that an individual with $40,000 AGI could only take a maximum of $40,000 of charitable contributions as a deduction.

Casualty and Theft Losses

Casualty and theft losses are only deductible if due to a federally declared disaster.

Gambling Losses

Gambling losses are only deductible to the extent of gambling winnings. If an individual had $5,000 of gambling losses and $300 of gambling winnings, then only $300 of the $5,000 losses would be deductible. The winnings would be reported as income elsewhere on the tax return.

If you are looking for a CPA or have any questions about accounting services, please contact me, Catherine Roe, at catherine@cowartroecpa.com or 504-252-0652. I would love to work with you!

Catherine Roe