Standard And Itemized Tax Deduction Calculator

Pros and Cons of Standard or Itemized Deductions On Filing Taxes

With tax season around the corner, its time to make some important decisions. For instance, if you have numerous itemized deductions such as mortgage interest, charitable contributions, etc., it may make sense for you to itemize your deductions instead of using the standard deduction for your tax filing status. Use our calculator below to help you determine whether to itemize or take the standard deduction.

How Will the Tax Cuts and Jobs Act of 2017 Impact Me

The Tax Cuts and Jobs Act doubled the standard deduction to $13,850 for single filers and $27,700 for married filing jointly, but completely eliminates personal exemptions. State, local and property tax deductions for those itemizing will be capped at $10,000. It also expands the medical expense deduction for two years for filers meeting that threshold from 10% AGI to 7.5% AGI. Mortgage interest will be deductible for mortgages up to $750,000 ($375,000 for married taxpayers filing separately) on properties purchased on or after December 15, 2017 and $1,000,000 ($500,000 for married taxpayers filing separately) on homes purchased before that date. The ceiling for charitable donations is now 60% of AGI. Use this calculator to determine which option is best for you.

If you are expecting either a large refund or a significant tax bill, use another calculator to determine if you should adjust your payroll withholdings.

Understanding Deductions

Deductions can help you lower your tax obligations by lowering the amount of money you are taxed on. Every taxpayer can choose to lower their taxes by itemizing qualified deductions, or taking the standard deduction set by the IRS.

If you decide to itemize, you can deduct allowable expenses such as charitable donations, mortgage interest, property taxes, retirement savings contributions and other items to decrease your taxable income.  While it can be hassle to keep track of expenses, it can pay of largely if your itemized deductions are greater than the standard deduction.

The standard deduction is a flat reduction to your adjusted gross income.  The dollar amount is based on whether you are married, single, the head of a household, a senior age 65 or older or legally blind. In 2018 the standard deduction changed significantly, making it more attractive for a majority of filers to take the standard deduction rather than itemize.  Head of household can now claim a standard deduction of $20,800  ($27,700 for married couples filing jointly).

The Pros and Cons

Standard tax deductions have a few advantages:

  • You don’t have to keep receipts or determine what expenses of yours may be deductible
  • You qualify even if you don’t have any expenses that qualify for itemized deductions
  • You don’t have to list and claim lots of separate deductions or worry about what is a deductible and what is not
  • You won’t have to account to the IRS why you claimed a specific itemized deductible if you are ever audited.

However, the standard deduction also has some disadvantages. The most significant one is that there is a dollar limit. Even if you would qualify for more deductions if you itemized them, standard deductions only allow you to reduce your tax bill by a specific amount.

Itemized deductions have a few advantages, too:

  • They can save you more on your tax bill, especially if you have paid a significant amount in mortgage interest, medical expenses, or made considerable charitable contributions.
  • You get to choose which deductions to claim

These deductions have some drawbacks:

  • The IRS may challenge your itemized deductions.
  • You need to file and claim deductions, which means you need to keep track of them.
  • You need to keep proof of your deductions in case you are ever audited.
  • If your AGI (adjusted gross income) is above a specific limit, some of your itemized deductions may be limited.

Use the itemized tax deduction calculator at Money Help Center to determine whether your itemized deductions would save you more than the standard deduction, so you can file with confidence. Also, estimate your tax liability for 2022.

*updated March 2023