Difference Between Itemized Deductions and Standard Deductions (With Table)

If you are a taxpayer, you must follow several guidelines and rules for maintaining your tax. Many programs are launched by the government to help people in reducing their taxes. Not paying tax is a legal offence, and for that government can take you to jail. Therefore it is necessary to pay tax if you have a good job.

Deductions are methods with the help of which taxpayers can reduce their taxes. Itemized deductions and Standard deductions are two deduction methods. Where people need to use ‘Schedule A’ if they claim for Itemized deductions and should fill the form 1040 but in the case of Standard deductions, there is no need for scheduling.

Itemized Deductions vs Standard Deductions

The difference between Itemized deductions and Standard deductions is that Itemized deductions can be claimed by any taxpayer, but they need to use ‘Schedule A’ and should properly fill the 1040 form. On the other hand, Standard deductions cannot be claimed by a non-resident, and in this deduction, there is no need of using ‘Schedule A’.

Itemized deduction is away with the help of which people can reduce some amount from tax while paying their taxes. But it comes with some limits like medical expenses, charitable gifts, etc, which means Itemized deduction cannot be used in these categories. It should be listed in ‘Schedule A’ of form 1040.

A Standard deduction can be used by any person whether he or she is a proper resident of a country or not. It is offered by the Internal revenue service department to those who don’t want to use ‘Schedule A’ of form 1040 for calculating their taxable income. The amount which is allotted is based on your age, dependency on someone, etc.

Comparison Table Between Itemized Deductions and Standard Deductions

Parameters of Comparison Itemized DeductionsStandard Deductions
DefinitionItemized deduction is a way or method which helps in reducing your tax-paying by subtracting some amount from your adjusted gross income. The standard deduction is a small portion of your income that is not included in your tax bill.
‘Schedule A’ requirementItemized deduction requires the user to use ‘Schedule A’ during the claiming process. Standard deduction does not require using ‘Schedule A’ criteria to claim the facility.
Non-resident inclusionIn Itemized deduction a taxpayer should give his or her proper details and non-residents are also included. Standard deduction does not require deep details and non-residents are not included.
Form typeThe form type used in Itemized deduction is schedule A of form 1040. Standard deductions do not use schedule A but it requires form 1040EZ.
Documentation requirementIn Itemized deduction all your details are required with proper documentation to claim this deduction. In Standard deduction, there is no need for documentation.

What are Itemized Deductions?

Itemized deduction reduces tax and is a method used by most of the population while calculating their taxable income. This deduction is taken from the adjustable gross income of a person to reduce a person’s taxable income, gradually reducing the taxes a person owes. But these deduction technique is subjected to limits.

Itemized deduction technique has some limits when it comes to medical expenses, charitable gifts, etc. This deduction should be listed on Schedule A. And the form typically used in this deduction technique is the 1040 form type. People who are not even residents of a particular country can also claim Itemized deduction.

Itemized deduction claiming process is a little bit complex as you need to provide all the documentation and all the details like age, education, gender, etc., very correctly, and if there will be malicious practices, then your documents may get rejected.

What are Standard Deductions?

The Standard deduction is also a process by which you can reduce your taxes. It is actually an amount that is not subjected to your tax. And this amount can be skipped making your taxpaying less. This deduction is only used when you are not claiming Itemized deduction, and it is allowed by the internal revenue service department to people.

The standard deduction depends on your eligibility, like whether you are dependent on someone, independent and disabled. Unlike Itemized deduction, non-residents are not allowed to claim for Standard deduction. The deduction amount also varies according to your taxable income or how much tax you pay.

Standard deduction does not require many details, and there is no need for a documentation process. It is an easy process but is subjected to many restrictions, like a limited amount is reduced.

Main Differences Between Itemized Deductions and Standard Deductions

  1. Itemized deduction is a way or method which helps in reducing your tax-paying by subtracting some amount from your adjusted gross income. On the other hand, a standard deduction is a small portion of your income that is not included in your tax bill.
  2. In Itemized deduction, all your details are required with proper documentation to claim this deduction. Whereas in the standard deduction, there is no need for documentation.
  3. Standard deductions do not use schedule A, but it requires form 1040EZ. While the form type used in Itemized deduction is schedule A of form1040.
  4. In Itemized deduction, a taxpayer should give his or her proper details and non-residents are also included. Whereas Standard deduction does not require deep details, and non-residents are not included.
  5. Itemized deduction requires the user to use ‘Schedule A’ during the claiming process. But Standard deduction does not require using ‘Schedule A’ criteria to claim the facility.

Conclusion

Several methods are provided by the government to reduce the tax burden on the public’s shoulders. And therefore, many types of tax-reducing methods were launched. Eligible people can apply and get the benefits of the programs. They need to provide proper documents and data for claiming the deductions. Firstly the documents are verified by the tax department, and then the eligible people are provided with the benefit.

Itemized deductions are not for the non-resident peoples, and several types of documents are needed for claiming this process. In addition, you need to use schedule A of form type 1040. Without using schedule A, you cannot claim this process. But for Standard deduction, you need not use the Schedule A type method. Instead, you just need to fill the form type 1040EZ.

References

  1. https://ecommons.cornell.edu/handle/1813/77723
  2. https://link.springer.com/article/10.1007/BF00874087
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