As we head into tax season it is beneficial to know about your itemized and standardized deductions. What is a standardized deduction? Your AGI or Adjusted Gross Income is the amount used to calculate what taxes you owe. To arrive at your AGI the sum of your earnings minus any deductions or tax credit is used. The standardized deduction is the minimum amount the IRS will allow you to deduct from the sum of your earnings to arrive at your AGI.
Itemized deductions & Tax credits
What is an itemized deduction? Itemized deductions are specific expenses that the IRS allows you to deduct from your income to arrive at your AGI. Tax credits are a dollar reduction in the overall amount you owe. For most people the amount of the standardized deduction will be more than the sum of all itemized deductions. You can take either the standardized deduction or the sum of your itemized deductions but not both.
2020 Standardized deduction List
- Standard or Single deduction
- Married Filing Jointly
- Married Filed Separately
- Head of Household
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