Each year everyone is allowed to deduct itemized deductions or deduct a standard deduction from their income, whichever is larger.
Last year, over 70% of taxpayers used the standard deduction in computing their tax. The standard deduction is a deduction for individuals who do not have much in itemized deductions. A flat amount is allowed even though the individual has not necessarily paid such amount. For 2023, the standard deduction is a substantial $27,700 for married couples filing a joint return.
Itemized deductions include, but are not limited to, such items as medical expenses (only those greater than 7 1/2% of your adjusted gross income), state and local taxes & real estate taxes (a/k/a SALT and limited to no more than $10,000), mortgage interest, and qualified charitible contributions. If you incur these type expenses in 2023 but they don't add up to $27,700, it is more beneficial to claim the standard deduction instead.
The standard deduction depends on your filing status and is adjusted each year for inflation. Most people find that the standard deduction is much larger than the total of their itemized deductions. As your income grows, you're likely to see your itemized deductions grow also. When they become large enough, you should claim itemized deductions instead of the standard deduction.
