Decision time: should I itemize or use the standard deduction?
Itemized deductions vs. Standard deduction
Itemized deductions are expenses allowed by the IRS that can decrease your taxable income. The standard deduction is a flat-dollar, no-questions-asked reduction in your taxable income. You can either take the standard deduction or itemize on your tax return. You can’t do both. The question is which method saves you more money by reducing the tax.
The standard deduction for married filing jointly increased from $12,700 to $25,100 from 2017 to 2021. The standard deduction for singles increased from $6,350 to 12,550 from 2017 to 2021.
The Tax Cut and Jobs Act (TCJA) changed materially the 1040 itemized deductions in the following manner:
Deduction for personal casualty and theft losses suspended (unless incurred in federally-declared disaster area)
Limitations to the deduction for state and local taxes
Limitations to the deduction for home mortgage interest in certain cases
Eliminating most miscellaneous itemized deductions such as:
Deductions for employee business expenses
Tax preparation fees
Investment expenses, including investment management fees
Employment related educational expenses
Job search expenses
Hobby losses
Safe deposit box fees
Investment expenses from pass-through entities
Eliminated the limitation on itemized deductions for certain high-income taxpayers.
Further details on the allowed itemized deductions for 2021 can be found on IRS.gov at: https://www.irs.gov/newsroom/individuals
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