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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
How We Make Money.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
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The Internal Revenue Service collects only on your taxable income. So an easy way to cut your tax bill is to reduce your taxable income.
You do that by claiming deductions when you file. But the exact way you take these deductions depends on your personal circumstances.
There are two common deduction methods: standard or itemized.
Standard deduction
The standard deduction amount is different for each filing status and is adjusted for inflation each year. You can find the amount that fits your filing situation on each of the tax return forms: 1040, 1040A or 1040EZ.
Most taxpayers take the standard deduction, which can be claimed on any of the three individual tax returns. These filers find that the standard deduction exceeds the amount they could achieve by itemizing. Even better, it also means they don’t have to keep track of each possible tax-deductible expense throughout the year.
Itemized deduction
Other filers find that the record keeping is worthwhile. By tracking tax-related costs, they can cut their IRS bill substantially by collecting receipts, maintaining expense logs and completing the long Form 1040 and Schedule A. Itemizing, however, isn’t always what it’s cracked up to be. In fact, your overall itemized deduction amount could be reduced if you make what the IRS considers too much money.
In addition to deductions, each filer gets to claim exemptions to help reduce taxable income. Exemptions are the tax-form version of the allowances you enumerated on your W-4. This exemption amount — for you, your spouse and any dependents — is available to every filer, regardless of which deduction method is used.
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