How to Choose Between Standard Deduction and Itemizing?

One of the most important choices you'll have to make during Los Angeles tax preparation is whether to itemize or accept the standard deduction. This decision can have a big effect on your tax liabilities and ultimately how much you pay in taxes and are reimbursed. Making an informed choice can be aided by your understanding of the distinctions and important considerations. Here's a resource to help you decide between itemizing and the standard deduction:

The Standard Deduction: What Is It?

Depending on your filing status, the IRS sets a predefined amount known as the standard deduction, which lowers your taxable income. The standard deduction levels for the tax year 2023 are $13,850 for individuals filing alone, $27,700 for married couples filing jointly, and $18,950 for heads of household.

What Is Meant by Itemizing Deductions?

Listing specific expenses that are deductible, such as mortgage interest, state and local taxes (SALT), medical costs beyond a predetermined amount, charity contributions, and unreimbursed work-related expenses, is known as itemizing deductions.

Things to Take Into Account: 

Total Allowable Expenses: Evaluate your prospective itemized reimbursements in comparison to the standard deduction. Itemizing may be more advantageous if your total deductible expenses—including property taxes and mortgage interest—exceed the standard deduction level.

Status of Marriage and Joint Filing: If you have significant combined deductible expenses, itemizing may be more advantageous for married couples filing jointly because they often receive a bigger standard deduction.

State and Local Taxes (SALT): Because of the high state income taxes and property taxes paid, taxpayers in high-tax states like California, which includes Los Angeles, may find it advantageous to itemize.

Charitable Contributions: You may be able to deduct charitable contributions over the standard deduction level if you make significant annual contributions by itemizing.

Also Read: LAST-MINUTE TAX MANAGEMENT SUGGESTIONS FOR BUSINESS OWNERS

How to Make a Decision:

Gather paperwork:

Gather all pertinent documents, receipts, and supporting paperwork, such as property tax bills, mortgage interest statements, receipts for medical expenses, and records of charitable contributions, for any prospective deductible expenses.

Calculate Potential Deductions:

To get an idea of how much you could itemize, add together all of your deductible costs.

Compare with Standard Deduction: Based on your filing status, compare your expected itemized deductions to the standard deduction.

Think About Tax Software or Speak with an Expert in Taxes: For your particular case, use tax preparation software or speak with a Los Angeles tax preparation professional to find out which option—standard deduction or itemizing—will save you the most money on taxes.

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