What the standard deduction is
The standard deduction is a fixed amount that depends on your filing status. It also rises a little if you are 65 or older or blind. The IRS updates the amounts each year, so use the current numbers from its instructions. It needs no receipts.
Most filers take it because it is large compared with their itemizable costs.
What can be itemized
Itemized deductions go on Schedule A. The main groups are state and local taxes paid (up to a limit), mortgage interest, charitable gifts and medical costs above a share of your income. Each has its own rules and limits.
Costs that are not deductible, such as groceries, rent and most commuting, do not count no matter how large they are.
How to compare them
Add your itemizable costs for the year and compare the total with the standard deduction for your filing status. If itemizing is higher, use Schedule A. If it is lower or close, take the standard deduction and save the paperwork.
Homeowners with a large mortgage, people with large medical bills and generous donors are the most likely to benefit from itemizing.
Bunching gifts
Some people alternate years: they group two years of charitable gifts into one year so that the year's itemized total passes the standard deduction, then take the standard deduction in the other year. It can help if you give regularly, though it needs planning and records.
The state may differ
A state can have its own rules. Some states let you itemize on the state return even if you took the standard deduction federally, or the other way around. New Jersey, for example, handles several deductions differently from the federal return, so look at the state instructions for the choices it offers.
A spouse who itemizes can force the other spouse to itemize when filing separately, so couples should check before filing apart.
A rough worked comparison
Say a single filer paid $9,000 in mortgage interest, $4,000 in state and local taxes and gave $1,500 to charity, for $14,500 of itemizable costs. If the standard deduction for that filing status is larger than $14,500, the standard deduction wins. If it is smaller, itemizing wins. These figures are invented to show the method, so use the current standard deduction from the IRS.
Remember that a change in the law can move the standard deduction or limit a category, so repeat the comparison each year rather than assuming last year's answer still holds.
Records to keep
If you itemize, keep receipts, mortgage statements, charity acknowledgments and a log of medical costs. The IRS can ask for proof. If you take the standard deduction you do not need to submit these, but you may keep them for next year.
Kestrel Tax compares the standard deduction with itemizing and tells you which is larger. Check the inputs, because the answer is only as good as the amounts you enter.
Common questions
Can I change my mind after filing?
You may be able to amend the return within the time allowed. Whether it helps depends on the new total.
Do I need to itemize to deduct charity?
Generally yes. Charitable gifts are an itemized deduction, apart from any special rules in the current year's law.
Is mortgage interest always deductible?
No. It has limits and conditions. Read the IRS rules and your lender's Form 1098.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.