All deductions work by cutting your taxable income, and lower taxable income means less taxes owed for you. Deductions are intentional loopholes, written into the tax code to give you a break for certain financial and life circumstances.
The three different types of deductions we’ve mentioned differ in where they appear on the tax return, and who qualifies to claim them.
The first of these, and the most basic, are the so-called above-the-line deductions. They’re really stand-alone adjustments, and you may qualify for them whether you itemize or take the standard deduction (we’ll get to those in a bit). These deductions include:
Up next, we come to a fork in the road: you either have to claim the standard deduction or itemize deductions. Naturally, you’d want to pick whichever saves you the most money, and that’s exactly what we do for you on your Tax Office & Associates™ return.
The first option, the standard deduction, is just what it sounds like: a fixed, base level amount you can get if you don’t qualify for a higher amount through itemized deductions. If your tax picture is pretty simple, and you don’t have a lot of special circumstances that you can write off as itemized deduction, you’ll probably get the standard deduction. The standard deduction is a set amount based on your filing status – married filing jointly, single, head of household and so on.
The standard deduction amounts for the 2019 tax year are:
Itemized deductions are tax breaks you can only take if you itemize. In effect, by itemizing you’re foregoing the standard deduction (you can’t get both), and opting to take the specific deductions you list on your tax return. Some of the more common itemized deductions include:
For more details, take a look at our Standard vs. Itemized Deductions infographic.
Don’t worry about choosing which type of deduction will save you the most money. At Tax Office & Associates™, we’ll look at your information and select which option saves you the most on your taxes owed. It’s just another way we make taxes smart and simple. There’s no reason not to call us today!