2024 Tax Prep: The Deductible Amounts You Need to Know

When it comes to preparing your federal income tax return, one of the pivotal choices you’ll face is whether to opt for the standard deduction or to itemize your deductions. Both methods aim to reduce your taxable income, but they function differently. Here’s a breakdown to help you navigate this decision.

What is the Standard Deduction?

Per the IRS, the standard deduction is a predetermined amount that reduces your taxable income. In contrast, itemized deductions can also decrease your taxable income, but the amount isn’t fixed and can vary based on your expenses.

Making a choice: Standard vs. Itemized Deduction

The IRS suggests that you should consider itemizing your deductions if:

  1. Your allowable itemized deductions surpass your standard deduction.
  2. You’re ineligible for the standard deduction.

However, it’s worth noting that most taxpayers opt for the standard deduction. To make an informed decision, knowing the standard deduction amount for the respective tax year is essential, and understanding any additional benefits, especially for those over 65, is essential.

Who Can’t Claim the Standard Deduction?

While many can claim the standard deduction, there are exceptions:

  • Nonresident aliens or dual-status aliens as per IRS definitions.
  • Married individuals filing separately when their spouse itemizes deductions.
  • Those filing a federal return within a specific timeframe due to accounting changes.
  • Estates, trusts, or partnerships.

How the Standard Deduction Amount is Determined

The standard deduction varies based on:

  • Your filing status.
  • Age (especially if you’re 65 or older).
  • Visual impairment.
  • A dependent on someone else’s tax return.

For instance, if you earned $50,000 in 2024 with a single filing status, the standard deduction is $13,850, reducing your taxable income to $36,150.

Standard Deduction Amounts for 2024

For returns due in April 2024, the standard deduction amounts are:

  • Filing single or separately, the deduction is $13,850
  • Married filing jointly $27,700
  • Head of Household, the deduction is $20,800
  • Additional deduction of $1,850 for those 65 or older or visually impaired.
  • Dependents can claim up to $1,250 or their earned income plus $400. However, the claimed amount must not exceed the basic standard deduction for their filing status.

Additional Deductions for Age and Visual Impairment

You can claim an additional standard deduction if you are 65 years old or older or if you are visually impaired. For 2024, this additional deduction is $1,850 for singles or heads of households. Married individuals get $1,500 per qualifying person. If you’re both 65 and visually impaired, the deduction doubles.

Standard vs. Itemized: Making the Right Choice

While most prefer the standard deduction due to its simplicity and often higher value, itemizing can be beneficial in certain scenarios. For homeowners, deductions like mortgage interest might make itemizing more lucrative. Even with changes from the 2017 Tax Cuts and Jobs Act, itemizing can still be advantageous for some, especially with deductions like medical expenses and charitable contributions.

If you need help deciding which method to choose or if you’re ineligible for the standard deduction, it’s wise to consult a tax advisor.

Future Changes to the Standard Deduction

The standard deduction is inflation-adjusted annually, leading to slight variations each year. The last significant change was during the implementation of the Tax Cuts and Jobs Act, which nearly doubled the standard deduction but also modified several itemized deductions.

In conclusion, understanding the nuances of the standard deduction can help taxpayers make informed decisions, ensuring they maximize their benefits and minimize their taxable income.

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