What’s the difference between claiming a standard deduction vs average itemized tax deductions?  Can those being single itemize versus only the married itemizing?

Deductions are expenses the IRS allows you to subtract from your taxable income, lowering your overall tax bill. There are two ways to file deductions – using the standard deduction, and “itemizing.”

Standard Deductions

Every taxpayer is allowed to take a standard deduction. The standard deduction assumes you have an “average” amount of tax-deductible expenses, and lumps them into one easy sum based on your circumstances. For 2007, the standard deduction amounts are:

• $850, or all earned income plus $300 (whichever is greater), for dependents (someone who is claimed as a dependent on someone else’s tax return)
• $5,350 for single (unmarried) individuals and those married filing separately
• $7,850 for a head of household (unmarried individual with at least one dependent and currently paying over half the cost of maintaining a home)
• $10,700 for those married filing jointly and qualifying “surviving spouses” (widows and widowers).

In addition to the regular standard deduction, there is an additional standard deduction for those who are 65 or older or blind. For 2007, this additional deduction is $1,300 for unmarried, unwidowed individuals and $1,050 for those who are married or widowed. This additional deduction is added to your regular standard deduction. For example, if you were 68, single, and not blind in 2007, your standard deduction would be $5,350 for being single plus $1,300 for being over 65, for a total of $6,650.

Itemized Deductions

But what if you had more tax-deductible expenses than the standard deduction covers? The other option, in that case, is to list all of your deductions separately. This is called “itemizing,” and can save you hundreds to thousands of dollars more than the standard deduction.

Deductions you can itemize include:

• Charitable donations
• Medical costs
• Interest payments
• Investment losses
• Gambling losses
• Certain legal fees
• Property lost to theft
• Casualty losses
• Expenses for your employer or business that were not reimbursed
• Estate tax payments
• Other taxes

However, if you choose to itemize deductions rather than claim the standard deduction, you are not allowed to claim any additional deductions for being 65 or older or blind.

Difference Between Standard Deduction and Itemized Deductions?

In general, you should claim whichever of the two deduction methods saves you the most money. If your itemized deductions are greater than the standard deduction, you should probably itemize. If the standard deduction is greater, claim the standard deduction.

There are, however, a couple of caveats to this rule. The first is that if a married couple is filing separately and one spouse itemizes deductions, the other spouse must also itemize deductions. Whatever one spouse does, the other must follow suit. So make sure to choose the route that works best for both spouses.

Second, if you are subject to the alternative minimum tax (AMT), you might save more by itemizing rather than taking the standard deduction, even if your itemized deductions are less than the standard deduction. The reason for this is that the standard deduction doesn’t reduce income subject to the AMT, while certain itemized deductions can.

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