Tax Tips & Calculators

You can choose to claim the standard deduction or to itemize your deductions, You should do whichever lowers your tax the most.

Standard Deduction

The standard deduction is a fixed dollar amount that reduces the income you're taxed on. Your standard deduction varies according to your filing status. In 2010, the standard deduction is:

• $5,700 if you're filing as single or married filing separately
• $11,400 if married filing jointly or qualifying widow(er)
• $8,400 if you qualify to file as head of household

Your standard deduction increases if you're blind or age 65 or older.

About 2 out of every 3 returns claim the standard deduction. The standard deduction:

• Allows you a deduction even if you have no expenses that qualify for claiming itemized deductions
• Eliminates the need to itemize deductions, like medical expenses and charitable donations
• Lets you avoid keeping records and receipts of your expenses in case you're audited by the IRS

Itemized Deductions

Itemized deductions also reduce your taxable income. Ex: If you're in the 15% tax bracket, every $1,000 in itemized deductions knocks $150 off of your tax bill.

You might benefit from itemizing your deductions on Form 1040, Schedule A if you:

• Have itemized deductions that total more than the standard deduction you'd receive
• Had large, uninsured medical and dental expenses
• Paid mortgage interest and real estate taxes on your home
• Had large, unreimbursed expenses as an employee
• Had large, uninsured casualty – fire, flood, wind – or theft losses
• Made large contributions to qualified charities
• Had large, unreimbursed miscellaneous expenses

However, if your itemized deductions total less than your standard deduction, you can still itemize deductions rather than claim the standard deduction. You might want to do this if the tax benefit of itemizing on your state return is greater than the tax benefit you lose on your federal return by not claiming the standard deduction.

Before 2010, if your adjusted gross income (AGI) from Form 1040, line 38 was more than certain amounts, some of your itemized deductions were limited. However, for tax year after 2010 the IRS removed this limitation. You can deduct the full amount of your itemized deductions.

To learn more, see Publication 505: Tax Withholding and Estimated Tax.