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For U.S. taxpayers who meet their tax obligations, the Internal Revenue Service (IRS) offers tax credits and deductions with the aim of providing tax relief.
According to the official IRS website, “you can claim the credits and deductions when you file your tax return to reduce your taxes”.
How do IRS tax deductions work?
While tax credits reduce the amount of taxes a taxpayer must pay, and some can even be refundable, deductions reduce the portion of income that is subject to tax. In this way, they can lower the final amount of taxes owed.
The difference lies in what is reduced: while credits directly affect the tax amount, deductions reduce the amount of income on which taxes are calculated.
How and why calculate the tax deduction?
Choosing correctly between these types of deductions can change the amount of income that remains subject to tax. For this reason, it is generally advisable to compare the standard deduction with the total of itemized deductions to determine which allows for a greater reduction.
To find out how much standard deduction applies, the IRS offers the Interactive Tax Assistant (ITA), a tool that answers questions and guides the taxpayer according to their particular situation.
To use it, these steps must be followed:
- Go to the assistant “How much is my standard deduction?”.
- Select the “Begin” button.
- Provide information such as filing status and the taxpayer’s date of birth and, if applicable, their spouse’s.
- Complete the requested information on income and other tax data.
- Answer the questions presented by the tool according to the personal situation.
- At the end, the system indicates the amount of the standard deduction that could apply based on the information provided.
What types of deductions does the IRS have and who is eligible?
The IRS distinguishes between the standard deduction and itemized deductions. Although both allow taxable income to be reduced, they work differently.
The standard deduction is a specific dollar amount that is subtracted from taxable income. This amount is adjusted periodically for inflation and may vary depending on factors such as filing status, age, and other circumstances.
There is also an additional standard deduction for people who are 65 or older at the end of the tax year and for those who are blind.
Itemized deductions, for their part, allow certain expenses that meet the IRS requirements to be added, such as:
- Eligible medical and dental expenses.
- Certain mortgage interest.
- Certain state and local taxes.
- Qualified charitable contributions.
In addition, for tax year 2025, the IRS added an enhanced additional deduction for certain people age 65 or older, subject to specific requirements and limits.
Requirements to qualify for a standard deduction
In general, to claim the standard deduction, the following conditions must be taken into account:
- File as an individual under an allowed filing status
- Do not claim itemized deductions.
- If another taxpayer can claim the person as a dependent, a standard deduction may still apply, although the amount is subject to special limits.
Who should itemize their deductions?
Itemizing deductions may be convenient when the sum of all deductible expenses exceeds the amount of the standard deduction to which the taxpayer is entitled.
In cases where a person cannot use the standard deduction, it may also be necessary to resort to itemized deductions, provided they have expenses that meet IRS requirements.
Conversely, if the standard deduction is higher than the total of expenses that could be itemized, using it usually allows a greater reduction in taxable income and simplifies filing the return.