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Tax return deductions reduce the amount of taxable income when filing a Federal or state income tax return. In other words, using these deductions can reduce the amount of taxes that a taxpayer owes.
In most cases, taxpayers have a choice or option of either taking the “standard deduction” or “itemizing” their deductions. The standard deduction may be quicker and easier, but, itemizing your deductions may lower your income taxes more, in some situations. It’s important for all taxpayers to look into which deduction method is best before they file their income tax returns.
New
this year
Following
tax law changes, cash donations of up to $300 made by December 31, 2020 are deductible without having to itemize when people file a
2020 tax return.
From the Internal Revenue Service-Tax Tip 2021-22:
Here are some details about the two methods to help people decide deduction to take:
Standard
deduction
The
standard deduction is an amount that reduces taxable income. The amount adjusts
every year and can vary by filing status. The standard deduction amount depends
on the taxpayer’s filing status, whether they are 65 or older or blind, and
whether another taxpayer can claim them as a dependent. Taxpayers who are age
65 or older on the last day of the year and don’t itemize deductions are
entitled to a higher standard deduction.
Taxpayers benefit from the standard deduction if their standard deduction is more than the total of their allowable itemized deductions. They can use the Interactive Tax Assistant, How Much Is My Standard Deduction? to determine the amount their standard deduction and if they should itemize their deductions.
Itemized
deductions
Taxpayers
may itemize deductions because that amount is higher than their standard
deduction, which will result in less tax owed or a larger refund. In some
cases, they not allowed to use the standard deduction.
Tax software can guide taxpayers through the process of itemizing their deductions. Taxpayers who itemize file Schedule A, Form 1040, Itemized Deductions or Form 1040-SR, U.S. Tax Return for Seniors.
A taxpayer may benefit by itemizing deductions if any of following apply to their tax situation, they:
- Had large uninsured medical and dental expenses
- Paid interest and taxes on their home
- Had large uninsured casualty or theft losses
- Made large contributions to qualified charities
Individual itemized deductions may be limited. Schedule A, Form 1040, Itemized Deductions can help determine what limitations may apply.
More
information:
Publication 501, Dependents, Standard Deduction, and Filing
Information
Topic No. 551, Standard Deduction
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this tip on social media — #IRSTaxTip: Things taxpayers should know when
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