When it comes to filing your taxes, you have choices. You can either claim the standard deduction, or you can itemize your deductions in the hopes that it will result in a higher total tax break for you.
A tax deduction allows you to exempt a portion of your income from taxes. It's different from a tax credit, which is a dollar-for-dollar reduction of your tax liability. But tax deductions can be extremely lucrative, especially if you're in a higher tax bracket. Knowing what each year's standard deduction entails will make it easier for you to decide whether itemizing makes sense.
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The 2021 standard deduction
The standard deduction you're entitled to is based on your filing status. For the 2021 tax year, here's what it looks like:
- $12,550 for single filers and married couples filing separately
- $25,100 for married couples filing jointly
- $18,800 for heads of household
Furthermore, the standard deduction is higher if you're 65 or over or blind. For single or head-of-household filers who meet these criteria, the standard deduction for 2021 rises by $1,700 (up from $1,650 in 2020). For married filers who are 65 or over or blind, the standard deduction for 2021 rises by $1,350 (up from $1,300 in 2020).
The standard deduction has increased over time
The standard deduction typically rises from year to year.
In 2020, the standard deduction was:
- $12,400 for single filers and married couples filing separately
- $24,800 for married couples filing jointly
- $18,650 for heads of household
In 2019, the standard deduction was:
- $12,200 for single filers and married couples filing separately
- $24,400 for married couples filing jointly
- $18,350 for heads of household
In 2018, the standard deduction was:
- $12,000 for single filers and married couples filing separately
- $24,000 for married couples filing jointly
- $18,000 for heads of household
The Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act, which was passed in late 2017, made a lot of changes to the tax code. One big change was that it nearly doubled the standard deduction from its previous levels.
For the 2017 tax year, the standard deduction was:
- $6,350 for single tax-filers and married couples filing separately
- $12,700 for married couples filing jointly
- $9,350 for heads of household
Prior to the Tax Cuts and Jobs Act, deciding whether to itemize or claim the standard deduction was an easier thing to do. With the standard deduction now being much higher, it could make sense for some people who previously itemized to opt for the standard deduction instead.
Running the numbers
To figure out whether it pays for you to claim the standard deduction, you'll need to add up your individual deductions and see which total is higher. Generally speaking, itemizing makes sense when you:
- Pay a lot of interest on a mortgage
- Pay a lot of state and local taxes
- Donate a lot of money to charity
- Have very high medical bills relative to your income
Keep in mind, too, that there are certain deductions you can claim without itemizing, like IRA contributions, educator expenses, and student loan interest. If you're not sure whether it pays to stick with the standard deduction versus itemize, you may want to consult a tax professional who can walk you through your options and help you score the largest tax break you're entitled to.
