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Understanding the 2021 Standard Deduction

With the arrival of a new year, the federal government has granted individuals a variety of new tax benefits. These include the 2021 standard deduction. Whether you are preparing to file your taxes as an individual or part of a family, understanding the 2021 standard deduction can help you maximize your tax breaks and lower your total annual tax liability.

What is the 2021 Standard Deduction?

The standard deduction is an amount set by the federal government that reduces the amount of taxable income that individual filers may report on their annual returns. The 2021 standard deduction for individuals is $12,550. This amount is up from the 2020 standard deduction of $12,400. Additionally, the 2021 standard deduction for married couples filing jointly is $25,100, which is up from $24,800 in 2020. Additionally, the 2021 standard deduction for those filing as a head of household is $18,800, up from $18,650 in 2020.

How to Take Advantage of the 2021 Standard Deduction

To take advantage of the 2021 standard deduction when filing your taxes, you must determine whether it is beneficial to itemize or whether the standard deduction amount is adequate to compensate for the expenses you would ordinarily be able to itemize. If itemizing your expenses would result in a greater deduction than taking the standard deduction, you may choose to itemize. However, if your deductible expenses are not greater than the standard deduction for the 2021 tax year, taking the standard deduction will result in a lower overall taxable income.

Note: You can only claim either the standard deduction or tax deductions from itemized expenses on your tax return, not both.

Benefiting from Tax Deductions in 2021

If you can take advantage of the 2021 standard deduction, you will benefit from a lower taxable income, which will in turn result in a lower overall tax liability. This can be especially helpful for individuals or families who are working to reduce their overall tax burden. Additionally, the 2021 standard deduction enables individuals to get instant tax deductions without having to add up individual expenses or go through the process of itemizing.

Additionally, remember that the 2021 standard deduction is not the only tax benefit available to individuals and families. Many states, counties, and cities offer their own deductions and tax credits. If you qualify for a state or local tax deduction in addition to the 2021 federal standard deduction, you may be able to save even more money on your taxes.

Conclusion

Understanding the 2021 standard deduction is key to filing your taxes accurately and taking advantage of all available deductions. The 2021 standard deduction is an especially helpful way to reduce your taxable income and lower your overall tax burden. However, if taking itemized deductions will result in a larger tax break, then it may be worth itemizing rather than taking the standard deduction. Remember to keep an eye out for additional deductions available at the state and local level in addition to the 2021 federal standard deduction.