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Most Americans like to keep their taxes as simple as possible, and for more than two-thirds of all taxpayers, using the standard deduction is an easy way to get a valuable tax break when April rolls around -- and the 2015 standard deduction amounts have risen from last year's levels. Still, many people don't fully understand the ins and outs of when to use the standard deduction. Let's take a closer look at how much you're allowed to take as a standard deduction in 2015, as well as the strategies that can help you make the most of it.
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Standard deduction amounts for 2015For most taxpayers, the standard deduction is determined solely by filing status. Single filers will get a $100 increase to $6,300 in 2015, while joint filers will see their standard deduction go up by $200 to $12,600. The head-of-household status splits the difference, with the new amount of $9,250 having risen $150 from 2014's standard deduction.
Some taxpayers have different amounts, however. Those who are 65 or older get $1,250 added to their standard deduction if they're married or $1,550 if they're single. The same addition applies for those who are blind, and some taxpayers may get multiple boosts to the overall standard deduction if both conditions apply or if both joint filers qualify.
Those who are claimed as dependents by other taxpayers, however, generally have a lower standard deduction of $1,050. If the dependent has earned income, though, the amount can be higher. To calculate it, take the dependent's total earned income, and then add $350. If that sum is greater than $1,050, you can claim the higher amount up to the normal maximum for whichever filing status the dependent claims.
When should you take the standard deduction?The most obvious situation in which to take the standard deduction is when you don't have enough itemizable deductions to net you a larger overall deduction. Some taxpayers also use the standard deduction even when they could get a slightly larger deduction by itemizing, simply because the standard deduction is so easy to claim and doesn't involve any additional forms or documentation. By contrast, if your itemized deductions are well above the standard deduction amount, then you'll want to itemize and get the lower tax bill.
One strategy many people can use to minimize their tax bills over time is to group two years' worth of deductible expenses into a single year. If you're consistently right around the standard deduction threshold, making double-payments of deductible items like property taxes, or bundling charitable contributions into a single year, can help push you well above the level at which you can itemize and get a larger deduction. The trade-off is that your itemizable deductions will be much lower in the off-year, but you can still use the standard deduction and often end up saving nearly as much. In the end, you'll get greater tax savings every other year using this method.
There's one standard deduction pitfall for the unwary, though. If you're over 65 or blind, you're eligible for a higher standard deduction, but you can't claim that greater amount on a 1040-EZ form. Instead, you'll have to use the more complex 1040 or 1040A forms to check the appropriate boxes for being 65 or blind and claim the correct standard deduction.
It may seem early to start thinking about your taxes for 2015, but knowing what the 2015 standard deduction amounts are now can help you plan for the remainder of the year. If you're smart about what deductions you take and when you take them, you can get even more tax savings from your standard deduction over the years.
The article 2015 Standard Deduction: How Much It Is and How Best to Use It originally appeared on Fool.com.
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