The standard deduction for individuals is a deduction developed under the tax code as an “average” deduction for individuals who either cannot or do not want to itemize deductions. It is a flat amount that you can use to reduce your taxable income. The standard deduction for 2012 is $11,900 for married filing jointly, $5,950.00 for single filers, and $8,700.00 for head of household. The standard deduction is taken on Forms 1040, 1040EZ and 1040A.
Itemize or take the standard deduction
There are 2 options when claiming deductions: standard and itemization. You can take one or the other, not both. Both reduce your taxable income, which translates into a smaller tax bill. And you will want to use the one that saves you the largest amount of money. Standard requires no recordkeeping and is automatic unless you elect to itemize; itemization requires documentation and several of the categories of itemized deductions have nondeductible floors.
Everyone can take the standard deduction regardless of whether or not your deductible expenses add up to your standard deduction level. Therefore you would only consider itemizing deductions if your deductible expenses are greater than your standard deduction.
Many more people are using the standard deduction instead of itemizing deductions because mortgage interest rates (the main component of itemized deductions for most taxpayers) are so low that many homeowners do not have enough itemized deductions to get above their standard deduction.
Whether to itemize each year or not varies from year to year. Do the math. Determine which scenario gives you the largest tax advantage. Most tax preparation software will allow you to input your itemized expenses and automatically give you either the standard deduction or itemized expenses, whichever produces the best result.
IRS Pub 501 has a section that is helpful on who should itemize.