Do you know the difference between standard and itemized deductions? We explain the difference on this episode of Elevate Wealth.

At Elevate Wealth Advisory, we want our clients to understand their tax return and everything that goes into it. If you need help, we’re here! Book a free consultation on our web site. Visit our Website below, and click the Let’s Talk button!

🔗 Website: https://elevate-wealth.com
🔗 Facebook: https://www.facebook.com/elevatewealthadvisory
🔗 Instagram: https://www.instagram.com/elevatewealthadvisory/

Subscribe to our channel and hit that notification bell 🔔 to stay updated on the latest investment strategies and financial planning tips!

FULL TRANSCRIPT:
Hey, everyone! Today I wanted to yet again talk to you about taxes. We're in the midst of tax prep season, and this week someone asked me: "What's the difference between the standard and the itemized deductions, and how do I know if I can even itemize?" So, when it comes to filing your taxes, you have two choices for reducing your taxable income: the standard deduction, or itemized deductions, and choosing the right one can significantly impact your tax bill. So, understanding the differences is crucial. First the standard deduction...I often describe the standard deduction as the amount of income that the IRS just gives you for free, no taxes right off the top. It's a predetermined amount that's set by the IRS that you can automatically deduct from your income without providing any documentation, and the amount varies depending on your filing status. Are you filing single, or married filing jointly, etc...and your age, and your blindness status. So in general, it's very simple to use. You know back when the Tax Cuts and Jobs Act of 2017 was passed, one of the goals of that legislation was to make tax prep simple enough to do your tax return on a postage stamp. Well, we didn't quite get there. But all you're really responsible for when preparing your income tax return is reporting all of your income sources and taking the standard deduction. You don't need to gather receipts, or track all your expenses, or anything like that just to prepare a simple return. However, the IRS also gives us another option. If we have specific expenses, called deductions, that add up to be more than our standard deduction, then it may be more beneficial for us to take itemized deductions. So, itemizing allows you to deduct specific individual expenses from your income, categorized into groups like medical expenses, charitable donations, mortgage interest, and state and local taxes. Using this strategy does require collecting and keeping receipts or other documentation to verify your deductions, but it could be more beneficial than the standard deduction if your allowable itemized expenses are greater than the standard deduction amount for your filing status. For example, let's say that I'm 45 years old and filing under the single tax filing status. The standard deduction for single filers for 2024 is $14,600. I own my home, and I have property and state and local taxes of $7,000, and I had mortgage interest of $5,000 this year, but I had no medical expenses out of pocket and I didn't make any charitable gifts. That means that my itemized deductions would be a total of $12,000...the state and local taxes of $7,000 plus the mortgage interest of $5,000, and that $12,000 is less than the standard deduction of $14,600. So this one's a no-brainer. I should more than likely take the standard deduction. On the other hand, let's use that same example but instead let's say I also made charitable gifts of $5,000. That would take my itemized deductions total to $17,000, which is more than the standard deduction. So, in this scenario, I would want to itemize my deductions. In general, the standard deduction is the easier and more efficient option for most taxpayers, and because the standard deduction amounts are now pretty high and there are not very many expenses you can itemize, then taking the standard deduction makes sense for many people. However, if you have significant expenses in certain categories like medical bills or mortgage interest, itemizing might be more advantageous. We recommend that you consult a tax professional to estimate which method will lower your tax bill. Remember, you can't claim both the standard deduction and itemized deductions on the same return. Your circumstances may change over time, so it's important to re-evaluate your deduction strategy each year. And that's just one of the things that we can help our clients with at Elevate. While we do not prepare returns or offer tax-specific advice, we do coordinate with our clients' accountants and become familiar with their tax situations for tax planning purposes, because minimizing taxes means keeping more of your hard-earned dollars in your pocket. At Elevate Wealth Advisory, we want our clients to understand their tax return and everything that goes into it. If you need help, we're here. Book a free consultation on our website. Visit elevate-wealth.com and click "Let's Talk."

#AdviceInAction #ElevateWealth #WealthWise #FinancialFitness #FinancialReview #StockMarket #taxes #TaxCuts #TaxCutsAndJobsAct #InvestmentPhilosophy #RetirementPlanning #ElevateWealthAdvisory #FinancialMarkets #stocks #retirement #StockReturns #InvestmentStrategies #FinancialPlanning #WealthBuilding #WealthAdviceForYourBestLife #SmallBusiness #taxdeductions #Form1040 #taxfiling

Ver todos los episodios