1040: Standard Deduction vs. Itemized Deductions

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Have you ever looked at your 1040 and wondered about standard deductions and itemized deductions but don't ask because you afraid of a longgggg answer?  I remember the first time that it mattered to me and how much I was helped by understanding the difference.  Sometimes taxpayers who normally only take the standard deduction give their preparers all of their stuff that would normally be used to itemize and fail to realize that it is not being used at all.

Standard Deduction: Standard deduction refers to a specific dollar amount (predetermined by the IRS) that can be deducted from your income to reduce your taxable income.  The amount of the standard deduction will depend on the filing status that is declared on the 1040.  Individuals that itemize their deductions and non-resident aliens are not eligible to use the standard deduction.

Itemized Deduction: Itemized deductions include expenses that can be claimed on a Schedule A as long as the expenses are listed on the list of allowable items created by the IRS. An example of allowable expenses would be: Mortgage Interest, Medical bills, Charitable Contributions, etc.

Getting an understanding of the differences between standard and itemized deductions will help to determine the amount of the taxable income that should be included on a 1040.

Tags:
Standard Deduction
Itemized Deduction
Schedule A
Mortgage Interest
Charitable Donations
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