Standard Deduction vs. Itemizing

Stay Ahead of Law Changes & Protect Yourself Against Being Audited: Corporate Transparency Act and Reasonable Compensation

Standard Deduction vs. Itemizing: A Comprehensive Guide for Small Business Owners and Self-Employed Individuals

Standard Deduction vs. Itemizing: A Comprehensive Guide for Small Business Owners and Self-Employed Individuals


As tax season approaches, one of the most significant decisions you’ll face as a small business owner or self-employed individual is whether to take the standard deduction or to itemize your deductions. This choice can have a substantial impact on your tax liability and requires a thorough understanding of the tax code and how it applies to your unique financial situation. At Molen & Associates, we are committed to providing you with the knowledge and guidance necessary to make the best decision for your tax needs.

The Standard Deduction: Simplifying Your Tax Filing

The standard deduction is a set amount that taxpayers can subtract from their income before income tax is applied. It’s designed to simplify the tax filing process, as it doesn’t require the taxpayer to itemize individual deductions. The standard deduction amount varies based on your filing status and is adjusted annually for inflation.

For the 2023 tax year, the standard deduction amounts are as follows:

  • Single or Married Filing Separately: $13,850
  • Married Filing Jointly: $27,700
  • Head of Household: $20,800

These amounts have been significantly increased since the Tax Cuts and Jobs Act (TCJA) of 2017, which aimed to simplify the tax filing process for many Americans by nearly doubling the standard deduction.

Itemizing Deductions: Maximizing Your Tax Benefits

Itemizing deductions allows taxpayers to list out specific deductible expenses that exceed the standard deduction. This process can be more time-consuming and requires detailed record-keeping, but it can lead to a lower tax bill if your itemized deductions are substantial. Common itemized deductions include:

  • State and local taxes (SALT), including income and property taxes
  • Mortgage interest on up to $750,000 of mortgage debt
  • Charitable contributions
  • Medical and dental expenses that exceed 7.5% of your adjusted gross income
  • Casualty and theft losses from a federally declared disaster

It’s important to note that the TCJA limited some itemized deductions, such as capping the SALT deduction at $10,000 ($5,000 if married filing separately).

Evaluating Your Options: Standard Deduction vs. Itemizing

Is it better to itemize or take the standard deduction?

The answer to this question depends on your individual tax situation. If the sum of your itemized deductions is greater than the standard deduction for your filing status, itemizing will typically be the better choice. However, if your itemized deductions do not exceed the standard deduction, taking the standard deduction will save you time and may result in a lower tax bill.

How do I know if I used the standard deduction or itemized?

To determine whether you took the standard deduction or itemized on your last tax return, review your filed Form 1040. If you attached Schedule A, you itemized your deductions. If Schedule A is not present, you likely took the standard deduction.

Do you lose the standard deduction if you itemize?

Yes, you must choose between itemizing deductions and taking the standard deduction. You cannot do both in the same tax year.

How much money do you have to make to itemize your taxes?

There is no set income level that dictates when you should itemize your taxes. The decision to itemize is based on whether your allowable itemized deductions exceed the standard deduction for your filing status.

The Decision-Making Process

When deciding whether to itemize or take the standard deduction, consider the following steps:

  1. Gather Your Financial Records: Compile all receipts, invoices, and documents related to potential deductions.
  2. Calculate Your Itemized Deductions: Add up all the deductions you’re eligible to itemize.
  3. Compare Deductions: Compare the total of your itemized deductions to the standard deduction for your filing status.
  4. Consider the Time and Effort: Itemizing requires more time and detailed record-keeping. Decide if the potential tax savings are worth the additional effort.
  5. Review Tax Law Changes: Stay informed about any changes to tax laws that may affect your ability to itemize or the value of the standard deduction.
  6. Consult with a Tax Professional: Tax laws can be complex, and the right choice can vary from year to year. A tax professional can provide personalized advice based on your financial situation.

Choosing between the standard deduction and itemizing is a critical decision that can affect your tax liability. At Molen & Associates, we understand the intricacies of tax planning for small business owners and self-employed individuals. Our team is ready to assist you in making an informed decision that aligns with your financial goals. 

If you’re ready to optimize your tax situation or if you have further questions about the standard deduction and itemized deductions, we invite you to contact us. Our knowledgeable tax professionals are here to provide the expertise and support you need.

Reach out to Molen & Associates at 281-440-6279 to schedule a consultation, and let’s ensure you’re making the most of your tax strategy this year. 

This blog post is for informational purposes only and is not intended as legal or tax advice. For advice on your specific situation, please consult a tax professional.

 Additional sources:


The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

Unlocking the Benefits of Charitable Contributions: A Guide to Maximizing Your Tax Advantages

Unlocking the Benefits of Charitable Contributions: A Guide to Maximizing Your Tax Advantages In the realm of personal finance and tax planning, charitable contributions emerge as a powerful tool not only for supporting causes close to your heart but also for...

Detailed Guide on Cryptocurrency Taxation and Reporting

Detailed Guide on Cryptocurrency Taxation and Reporting  In the United States, the Internal Revenue Service (IRS) has clear guidelines on the taxation of cryptocurrency, which is considered property for tax purposes. This classification has significant implications...

Gig Economy Taxation: a Detailed Overview

Gig Economy Taxation: a Detailed Overview Reporting Income as a Gig Worker Gig economy workers must report all income earned from their endeavors. This includes, but is not limited to: Earnings from part-time, temporary, or side gigs. Income not reported on...

Real Estate and Taxes: A Comprehensive Guide

Real Estate and Taxes: A Comprehensive Guide Real estate taxation is a multifaceted topic that encompasses various forms of taxes, including income tax, property tax, and sometimes even sales tax. Whether you’re dealing with personal or business real estate,...

Steps to Filing a Tax Extension

Is Filing an Extension Bad?   We get this question probably a thousand times a year. An extension is not inherently bad, it is truly personal preference. An extension will not increase your risk for an audit or red flag your return with the IRS. In fact, it is...

How to Pay Your Child From Your Business

How To Pay Your Children From Your Business Paying your children through your business can be a strategic way to manage your business's taxable income, while also providing your children with income and potentially teaching them about the value of work.  While it is a...

Tax Tips for Newlyweds

Tax & Financial Tips for Newlyweds in Houston Marriage is a significant milestone that not only unites two individuals in partnership, but in most cases, also merges their financial and tax situations. For newlyweds in Houston, understanding the tax implications...

Self-Employment Taxes: A Deeper Dive

Self-Employment Taxes: A Deeper Dive Self-employment taxes are a critical component of the tax system in the United States, impacting individuals who work for themselves. Understanding the nuances of these taxes can help self-employed individuals plan and manage their...

Education Tax Benefits: Maximizing Savings with Credits and Deductions

Education Tax Benefits: Maximizing Savings with Credits and Deductions Navigating the complexities of tax season can be daunting, but for those bearing the costs of higher education, there are valuable tax benefits that can ease the financial burden. Among these are...

How to request Individual Penalty Abatement

How to Request Penalty Abatement Penalty abatement is a great way to help reduce your client's tax debt. Here's how you can request apenalty abatement from the IRS. Let’s say you’ve determined that your client is eligible for a penalty abatement to help reduce their...

Request an Appointment Today

13 + 14 =

Call us at

Pin It on Pinterest

Share This