Standard vs. itemized deductions explained

What Are Deductions?

Tax deductions reduce your taxable income. The more deductions you can claim, the less tax you'll owe (or the bigger your refund).

Standard Deduction

The standard deduction is a fixed amount based on your filing status:

When to use the standard deduction:

• Your itemized deductions total less than the standard amount
• You want simplicity (no need to track expenses)
• You don't have significant deductible expenses

Itemized Deductions

Instead of taking the standard deduction, you can itemize specific expenses:

Common Itemized Deductions

1. **State and Local Taxes (SALT)** - Up to $10,000

- State income tax or sales tax

- Property taxes

1. **Mortgage Interest** - On loans up to $750,000

- Interest on your primary residence

- Interest on a second home

1. **Charitable Contributions**

- Cash donations to qualified charities

- Donated goods (fair market value)

1. **Medical Expenses**

- Only amounts exceeding 7.5% of your AGI

- Insurance premiums, prescriptions, procedures

1. **Casualty and Theft Losses**

- Federally declared disaster areas only

How to Decide

FileJoy automatically compares both options and recommends the better choice. Here's how to think about it:

Take the Standard Deduction If:

• You rent (no mortgage interest)
• You live in a low-tax state
• You don't make large charitable donations
• Your medical expenses are low

Consider Itemizing If:

• You have a large mortgage
• You live in a high-tax state (NY, CA, NJ, etc.)
• You made significant charitable donations
• You have high medical expenses

Example Comparison

Sarah, Single Filer:

• Mortgage interest: $8,000
• Property taxes: $4,000
• State income tax: $3,000
• Charitable donations: $2,000
• Total itemized: $17,000

Sarah should itemize because $17,000 > $14,600 (standard deduction).

Mike, Single Filer:

• No mortgage (rents)
• State income tax: $2,500
• Charitable donations: $500
• Total itemized: $3,000

Mike should take the standard deduction because $14,600 > $3,000.

FileJoy Makes It Easy

On the Deductions & Credits page, FileJoy:

1. Shows you both totals side by side
2. Recommends the better option
3. Lets you switch between methods to see the impact

You don't need to choose manually—we'll always apply whichever method gives you the bigger tax benefit.

Important Notes

• You can't do both—it's one or the other
• The SALT deduction is capped at $10,000 total
• Keep records of itemized expenses for 3-7 years
• Some deductions have AGI limitations