Can’t itemize? You still have tax breaks! It’s a common misconception that if you take the standard deduction, there are few additional tax benefits available to reduce your bill. The reality is, even if you don’t itemize, there are still several opportunities to lower your taxable income and keep more money in your pocket.
Standard Deduction vs. Itemizing: What’s the Difference?
Every taxpayer can take the standard deduction, which reduces your taxable income before calculating your tax bill. However, if your total deductions exceed the standard deduction, it may make sense to itemize instead. The primary reason many taxpayers itemize is homeownership, as mortgage interest and property taxes are often significant enough to justify itemizing.
Common sources of itemized deductions include:
- Mortgage interest
- Property taxes
- Charitable donations
- High medical expenses
Tax Breaks for Standard Deduction Filers
So, what if you take the standard deduction? Are you out of luck when it comes to additional tax savings? Not at all! Here are some common tax breaks you can still take advantage of:
- IRA Contributions: You can deduct up to $7,000 ($8,000 if you’re 50 or older) for contributing to a traditional IRA.
- Student Loan Interest: Deduct up to $2,500 in interest paid on student loans.
- Alimony Paid: If your divorce or separation agreement was finalized before January 1, 2019, you can deduct alimony payments.
- Health Savings Accounts (HSAs): Contributions to an HSA are tax-deductible if you qualify.
- Donating Appreciated Stock: Donate long-term appreciated stock to charity and avoid capital gains tax.
- Self-Employed Health Insurance Premiums: If you’re self-employed, you can deduct your health insurance premiums.
- Self-Employment Tax Deduction: You can deduct half of the self-employment tax you pay.
- Education Incentives: Take advantage of credits and deductions such as the American Opportunity Credit, Lifetime Learning Credit, Coverdell accounts, and Savings Bond interest deductions.
- Other Tax Credits: Credits like the Earned Income Credit, Child Tax Credit, Child & Dependent Care Credit, and Elderly or Disabled Credit can also provide significant savings.
Don’t Overlook Your Tax Savings
While income limits may apply to some of these deductions and credits, those who qualify can save a substantial amount on their taxes. The list above is far from exhaustive, so it’s important to review your unique situation each year to ensure you’re taking advantage of all available tax breaks.
So, don’t assume that tax benefits are only for itemizers! You, the standard deduction filer, may be eligible for valuable tax savings that could significantly lower your tax bill.
