Understanding Tax Deductions: Itemized vs Standard Deduction Explained

Summary

Tax deductions significantly lower taxable income by allowing taxpayers to choose between a fixed standard deduction and itemizing eligible expenses. The blog details various deductions, the impact of the TCJA, and the differences between deductions and credits. It also offers guidance on selecting the best approach to reduce overall tax liability.

Key Takeaways

Deductions reduce taxable income by either standard or itemized methods.
The TCJA reformed deduction limits, impacting mortgage interest, SALT, and more.
Meticulous record-keeping is crucial for itemized deductions.
Understanding the differences between deductions and credits is essential.
Specialized deductions exist for self-employed individuals and small businesses.