When the normal deduction is a whole lot less than the standard deduction, it’s time to claim it. Here’s how to calculate it, how it will affect you, and when you should do it.
When a Lawyer Fits the Bill: Ways and Means Justified Loss of Deductions?
The standard deduction can be combined with other tax deductions to save even more. And for many it is the most valuable deduction available to those who itemize.
When you itemize your deductions, you write off some deductions, but you only get a maximum of $1,600 per person in deductions that total more than $6,000.
Thus, to itemize all you can claim are deductions for state income taxes, local and certain property taxes, sales taxes, mortgage interest, charitable donations, student loan interest, medical expenses, and an amount equal to 5% of your AGI, to be determined by the IRS.
So how much money can you write off if you decide to itemize?
In 2019 the top amount you can take out of the standard deduction is $24,400 for married filing jointly, $18,350 for married filing separately, $12,200 for single filers and $6,350 for head of household. The IRS also includes education-related deductions, such as those for college-related tuition and expenses.
Adjustments to your AGI (to adjust the amount of items you cannot exclude for tax purposes) can reduce the number of itemized deductions you can take.
For example, if your AGI is $50,000, you may claim deductions of up to $1,700 for education-related expenses. However, if your AGI is $60,000, you may only be able to claim deductions of up to $1,700 for education-related expenses.
What if I don’t itemize?
One of the biggest surprises of every tax season is how much the standard deduction can reduce your taxable income. There are tax brackets that apply to all income, including taxable income of tens of thousands of dollars.
While the amount of allowable deductions increases incrementally as you do more in the tax-filing system, the amount of the standard deduction amounts to a significant amount of reduction.
For example, if your AGI is $30,000, the top $12,200 standard deduction for all income would reduce your taxable income by $19,600 — more than one-third of your total taxable income.
While there are more deductions available to many of us who don’t itemize, the standard deduction also is easily available to anyone who has no other tax liability. (To see some examples of the amount of your deduction compared to your income, see the chart below from the IRS.)