There are two types of deductions. Most taxpayers take the standard deduction that’s offered to everyone. In 2017, the value of the standard deduction for single filers and married couples filing separately is $6,350. For married couples filing jointly, the standard deduction is $12,700.
As you know, there are many possible deductions that can lower your taxable income. Generally speaking, there are 16 main categories of deductions.
- Medical and dental expenses
- State and local income taxes
- State and local sales tax
- Real estate taxes
- Personal property taxes
- Other taxes
- Home mortgage interest
- Mortgage insurance premiums
- Investment interest
- Gifts to charity
- Casualty or theft losses
- Unreimbursed employee expenses
- Tax preparation fees
- Investment expenses and fees
- Student Loan interest
- Gambling losses
There are some limitations associated with some deductions. You can only deduct medical and/or dental expenses that are greater than 10 percent of your adjusted gross income.
If the total value of your possible deductions is greater than the total value of the standard deduction associated with your filing status, you should itemize your deductions; for example, if you’re a married couple filing jointly your standard deduction in 2017 is $12,700. If you have a mortgage payment, student loan interest payments, and qualifying medical expenses that added together are greater than $12,700, you should itemize.
The “Pease Rule” limits the ability of wealthy taxpayers to itemize their deductions. For a single filer, most deductions begin phasing out at an adjusted gross income of $261,500. For a married couple filing jointly, the phase out begins at an AGI of $313,800.