Itemizing Deductions vs. The Standard Deduction

Taxpayers have two options for their personal income tax deductions on form 1040, the standard deduction or itemized deductions. You can’t do both, you have to choose one or the other. 

Generally, if you don’t have a lot of deductible expenses then you’re likely better off taking the standard deduction. For 2021, the standard deduction for single individuals (or married individuals filing separately) is $12,500. If you’re head of household (meaning you have dependents) the limit is $18,800. For married couples filing jointly, the standard deduction is $25,100.

The following are some of the most common deductions you can take if you itemize (note that there are some exceptions to all of these, but as a general starting point these are some of the most common large deductible expenses):

  • The interest payments on your mortgage, up to $750k of total mortgage debt (you can no longer deduct interest on a home equity line of credit (called a “HELOC”) unless it was used for home improvement).
  • State and local taxes, up to a maximum of $10k per year
  • Donations to charities
  • Medical expenses that exceed 10% of your adjusted gross income

If the total of all those expenses is greater than your standard deduction, then you should itemize. If the standard deduction is larger, then you should use that. If you choose to itemize you will do so on Schedule A. 

Some people can’t take the standard deduction. For example, if you’re married filing separately and your partner itemizes, you have to itemize.