Standard Deduction versus Itemized

John and Emily are married and file their taxes jointly. In 2024, they had the following expenses:

$8,000 in mortgage interest on their primary residence
$4,500 in state income taxes
$3,000 in property taxes
$2,000 in charitable donations
$7,000 in medical expenses (their adjusted gross income is $100,000)

If John and Emily want to maximize their tax deductions, which of the following should they do on their 2024 return?

Claim the standard deduction for married couples filing jointly.
Itemize their deductions, as the total exceeds the standard deduction.
Deduct only the medical expenses, as they exceed 7.5% of their adjusted gross income.
Split their deductions, with John claiming the standard deduction and Emily itemizing her expenses.

For the 2024 tax year, the standard deduction for married couples filing jointly is $27,700. To benefit from itemizing deductions, the total of John and Emily's itemized expenses must exceed the standard deduction. Their total itemized deductions include:

Mortgage interest: $8,000
State and property taxes (capped at $10,000): $7,500
Charitable donations: $2,000
Medical expenses above 7.5% of AGI: $7,000 - $7,500 (7.5% of $100,000) = $0

This gives them a total of $17,500 in itemized deductions, which is less than the standard deduction of $27,700. Therefore, they should claim the standard deduction to maximize their tax benefit.

Posted in CFP® Practice Question

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