If you look on the second page of your 1040, you’ll see on the top left-hand side a box that says “Standard Deduction.” If you’re single (aka not married), your standard deduction is $6,100 for 2013. What is a deduction? It’s basically just another item that reduces the amount of income you have to pay taxes on. It’s taken after you calculate your Adjusted Gross Income (Line 37/38). You can take either the standard deduction or an itemized deduction on your tax return, but not both.
Most of us will be taking the standard deduction because the total of our itemized deductions won’t be greater (i.e. won’t be above $6,100 if you’re single in 2013). Since deductions reduce your taxes, you always want to take the deduction that has the largest amount between the two.
- medical & dental expenses that add up to being more than 10% of your AGI
- certain taxes
- home mortgage points
- interest expense
- charitable contributions*
- casualty losses/theft
- miscellaneous itemized deductions (above 2% of your AGI)
- miscellaneous itemized deductions (with no 2% AGI limit)
*A lot of people donate to church or a charity thinking it will reduce their taxes. Unfortunately, unless your donation plus anything else on the itemized list is more than the standard deduction, you won’t receive any tax benefit from that donation. You should still donate, of course. I just want to clarify the popular misconception.