Income Tax Issues: How do the standard and itemized deductions compare?
Tax filers may either claim the standard deduction, whose value varies with filing status, or itemize individual deductible expenses. In either case, taxable income is reduced by the amount of the allowed deduction.
- In 2011 single filers and married persons filing separately may claim a standard deduction of $5,800. The standard deduction for married couples filing jointly is double that amount: $11,600. Heads of household may deduct $8,500. Those values are adjusted each year for inflation as measured by the consumer price index for all urban consumers (CPI-U).
- Individuals who are blind or age 65 or older may deduct additional amounts. Single filers and heads of household may claim an additional $1,450 for each condition (blind or elderly); the additional amount for married filers is $1,150 per condition. Thus, for example, an elderly couple who are both blind may claim a total deduction of $16,200 ($11,600 standard deduction plus four additional $1,150 deductions).
- In 2009 nearly two-thirds of tax units claimed the standard deduction (figure 1). About one in seven of those units claimed an additional deduction because at least one member was elderly or blind.
- Alternatively, tax filers may itemize the actual amounts spent on allowed deductible expenses, the most common of which are state and local taxes, mortgage interest, charitable contributions, medical and dental expenses, and casualty and theft losses (figure 2).
In 2011 and 2012, high-income individuals may claim the full value of their itemized deductions. If the 2001-03 tax cuts expire in 2013 as scheduled, however, those taxpayers will have to reduce their itemized deductions by 3 percent of the amount by which adjusted gross income exceeds a threshold—projected to be $174,450 in 2013 ($87,225 for married couples filing separately) —but not more than 80 percent of deductions claimed. The 2001 tax act cut that reduction by one-third for 2006 and 2007, by two-thirds for 2008 and 2009, and completely for 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the temporary repeal through the year 2012.
- Itemized deductions averaged about $26,344 in 2009 for tax units claiming them (figure 2). Married couples filing jointly tended to have higher deductions, averaging nearly $32,000; deductions averaged nearly $19,000 for single filers and almost $20,000 for heads of household.
- Mortgage interest and state and local taxes each accounted for somewhat over a third of average itemized deductions in 2009, nearly $9,500 each. Charitable contributions made up about half of the remaining deductions, an average of about $3,500.