For most Americans, taking the standard deduction on your tax return is better than claiming itemized deductions. See how much you can deduct on your next tax return.
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Taxpayers have a choice between taking the standard deduction or claiming itemized deductions when filling out their federal income tax return. And, of course, you ll always want to pick whichever one is higher. As predicted, the number of American taxpayers claiming the standard deduction on their tax return shot up significantly after the 2017 tax reform law. Why? Because that law nearly doubled the standard deduction amount.
Before the tax reform law, about two-thirds of all taxpayers claimed the standard deduction. That jumped to almost 90% for the 2018 tax year, which was the first year for the enhanced standard deduction. Since then, the vast majority of American taxpayers have continued to claim the standard deduction on their tax return.
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1. Missing a tax break
Tax credits and exemptions are available, particularly for those who were financially affected by the pandemic. The latest COVID-19 economic relief package, signed by President Donald Trump on Dec. 27, created a special break for obtaining the Earned Income Tax Credit, a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children.
But the deal isn’t automatic. Filers and the people who help them with their taxes now must be aware of the new option and take the time to review 2019 earnings, as well as earnings in 2020, to calculate the credit. And they cannot simply assume that they won’t qualify for it.
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