There are many types of deductions in the tax code. Generally speaking, there are two types of deductions the IRS allows: one can elect to take the flat standard deduction – which is based on your filing status – or elect to take itemized deductions. While both allow you to lower your taxable income, it can be a bit of a challenge determining which method works best for your personal tax situation. ATC tax preparation experts can help you navigate around the complexities and guide you towards the deduction that is most beneficial and suits your tax profile best.
Tax Tools
Taxpayers are categorized into a tax bucket based on their filing status.
A standard deduction is the dollar amount that can be deducted from one’s income. Your standard deduction is determined based on your filing status. In some cases, the standard deduction may exceed itemized deductions.
The standard deduction for the 2023 tax year
| Status | Deduction | Born before January 2, 1954 | Blind |
|---|---|---|---|
| Single | $13,850 | $1,850 | $1,850 |
| Married Filing Jointly | $27,700 | $1,500 | $1,500 |
| Married Filing Separately | $13,850 | $1,500 | $1,500 |
| Head Of Household | $20,800 | $1,850 | $1,850 |
| Qualified Widow(er) With Dependent Child | $27,700 | $1,500 | $1,500 |
Itemized deductions allow you to deduct your expenses such as mortgage, interest, donations, medical expenses, and so forth. When the total of your itemized deduction exceeds your standard deduction, your total deduction amount begins to increase. Additional deductions can reduce the amount of income being taxed and increase your tax refund or diminish any tax liability. Take advantage of our accurate tax preparation services at ATC. With superior understanding of the tax codes as well as state and federal deductions, our team of tax service professionals will assess your personal tax situation and help you find and claim all the credits and hidden tax deductions you qualify for and one’s that benefit you mostfrom one’s income. Your standard deduction is determined based on your filing status. These amounts are governed by the IRS.
Itemized Deductions
In general, if your total itemized deductions exceed the standard deduction, you should itemize. This includes these situations:
- You do not qualify for the standard deduction, or the amount of the standard deduction is limited
- You pay interest and taxes on a home or personal property
- You have large, uninsured casualty or theft losses
- You have large, uninsured medical and dental expenses
- You have large, unreimbursed employee business expenses
- You make large contributions to qualified charities
Most deductions are subject to the 2% of adjusted gross income (AGI) rule. This means the sum of expenditures greater than 2% of your total AGI are deductible in the amount that exceeds the 2%. If you’re under 65, medical and dental expenses that are greater than 10% of your total AGI are deductible in the amount that exceeds the 10%. If either you or your spouse is 65 or older, you can deduct the amount that exceeds 7.5% of your AGI. The limitation for itemized deductions claimed on tax returns for tax year 2016 will begin with incomes of $259,400+ (Single), $285,350+ (Head of Household) and $311,300+ (married couples filing jointly).
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