Get to know the authorIt’s a question that comes up for expats almost every year: “Should I choose the standard deduction or itemized deductions?” The answer — as with so many things in life — is “it depends.” But if you need help choosing between itemized deductions vs. the standard deduction, we’re here to help.
While the standard deduction is generally simpler, itemized deductions can result in significantly higher tax savings. So how do you know which one would be more beneficial for you? We’ll break it down below.
We’ve put together a brief (but thorough!) guide on everything expats need to know about the standard deduction vs. itemized deductions. Read on to learn what these deductions are, how to claim them, which works better in certain situations, and more. Let’s get started!
What is the standard deduction?
The standard deduction is a fixed dollar amount that US taxpayers can subtract from their gross income to reduce their overall taxable income (and thus, their tax liability).
The base standard deduction amount is determined by filing status, although those who are over 65 and/or blind can claim a higher standard deduction. To account for inflation, these amounts generally increase each year. For the 2024 tax year, the standard deduction is as follows:
- Single filers/married filing separately: $14,600
- Married couples filing jointly: $29,200
- Heads of household: $21,900
Note:
Dependents may claim a reduced standard deduction if filing a tax return independently: either $1,300, or the individual's earned income plus $400 (whichever’s bigger).
Here’s how the 2024 standard deduction compares to tax years 2023 and 2025:
Standard deduction amounts for taxpayers under 65
| Tax Year | Single or Married Filing Separately | Married Filing Jointly | Head of Household |
| 2023 | $13,850 | $27,700 | $20,800 |
| 2024 | $14,600 | $29,200 | $21,900 |
| 2025 | $15,000 | $30,000 | $22,500 |
Taxpayers who are over 65 or blind can claim an additional deduction ($1,950 for single filers, $1,550 for married couples). Taxpayers who are over 65 and blind can claim double this amount. Those who have qualified for a net disaster loss in a federally declared disaster can calculate an increased standard deduction on Schedule A (Form 1040).
Typically, those whose gross income is less than their standard deduction don’t have to file a tax return. However, there are a couple of key exceptions for:
- Those with at least $400 of net self-employment income
- Married individuals filing separately with at least $5 in income
Who can claim the standard deduction?
Most taxpayers who don’t claim itemized deductions are eligible for the standard deduction. However, you’re not eligible to claim the standard deduction if you:
- Are married, filing separately, and your spouse itemizes deductions
- Are filing for a period of less than 12 months (such as if you’re a business owner who elects to move from calendar-year filing to fiscal-year filing)
- Are filing as an estate, trust, common trust fund, or partnership
How to claim the standard deduction
Fortunately, claiming the standard deduction is simple. First, you’ll check any relevant boxes in the “Standard Deduction” section of Form 1040 as necessary.
Then, you just need to add the standard deduction amount you’re eligible for on Line 12.
Note:
Those with net qualified disaster losses must fill out the “Casualty and Theft Losses” section on Schedule A (Form 1040).
What are itemized deductions?
Itemized deductions are expenses that you can subtract from your gross income to reduce your overall taxable income (and ultimately, your tax bill). Some of the most common types of itemized deductions include:
- Mortgage interest: Any interest you’ve paid on the first $750,000 — or $375,000 if you’re married filing separately — of your mortgage debt for a primary or second home
- Medical & dental expenses: Expenses on medical or dental care for yourself, your spouse, and/or your dependents exceeding 7.5% of your adjusted gross income (AGI)
- State & local taxes (SALT): Certain state and local income taxes up to $10,000 ($5,000 if married filing separately), including income taxes (or sales taxes that function as income taxes), property/real estate taxes, and personal property taxes
- Note: Those who won’t be claiming the Foreign Tax Credit (FTC) can deduct up to $10,000 worth of foreign income taxes here, but it’s generally much more beneficial to claim the FTC on Form 1116 instead
- Charitable contributions: Up to 60% of non-qualified charitable cash contributions and qualified cash contributions up to 100% of your AGI
- Note: Corporations can deduct up to 25% of their taxable income in qualified contributions. Any excess will carry over to the following tax year
Note:
In past tax years, taxpayers could deduct miscellaneous deductions — such as unreimbursed employee expenses, educator expenses, and investment expenses — worth up to 2% of their AGI. However, the 2017 Tax and Jobs Cut Act (TCJA) made miscellaneous expenses like these ineligible for deduction.
You may notice that business expenses are not included in the list above. Business owners and self-employed individuals can deduct the cost of ordinary and necessary business spending, but it does not qualify as itemized deductions.
As we’ll discuss in a bit, you’ll use Schedule A (Form 1040) to itemize deductions — but you’ll claim business expenses on one of the following forms:
- Schedule C: Single-member LLCs & sole proprietors
- Form 1065: For members of partnerships
- Form 1120: For C corporations
- Form 1120-S: For shareholders of S corporations
- Form 1120-F: For shareholders of foreign corporations
How to claim itemized deductions
To claim itemized deductions, you’ll need to complete Schedule A. This simple, one-page form contains seven different sections:
- Medical and Dental Expenses
- Taxes You Paid
- Interest You Paid
- Gifts to Charity
- Casualty and Theft Losses
- Other Itemized Deductions
- Total Itemized Deductions
In the first six sections, you’ll enter the deduction amount you’re claiming in each category. In the final section, you’ll calculate your total amount of itemized deductions allowed. Once you have that figure, you’ll enter it on Line 12 of Form 1040.
While Schedule A itself is short and straightforward, reviewing all of your expenses eligible for deduction over the year can be tedious. To make this task easier, consider tracking itemized expenses throughout the year. Some bookkeeping software automatically logs itemized expenses — alternatively, you can manually track them in an Excel sheet.
Tip:
Keep receipts for any itemized deductions you claim for at least three years to support your claim in the event of an audit.
Deciding between itemized deductions vs. standard deduction
Now that you understand both the standard deduction and itemized deductions, let’s tackle the question: Which one should you choose? The only real way to know which offers the better deal is by calculating your itemized expenses and comparing the total to the standard deduction.
However, a few tax situations in which the standard deduction tends to be a better fit include when:
- You don’t own a home and therefore, don’t have any home mortgage interest to deduct
- You’re not a state tax resident, or you’re a tax resident of a state with low or no income taxes
- You haven’t made a significant amount of charitable contributions
- Your medical and dental expenses were low throughout the year, such as if you had access to universal healthcare
- You didn’t keep track of your expenses throughout the year, and don’t want to spend the time and effort tracking them down now
- You want to make filing your taxes as quick and easy as possible
The more of these criteria you meet, the more likely it is that the standard deduction is the better option.
Conversely, some circumstances in which itemized deductions may be more valuable include when:
- You own a home with a mortgage
- You’re a state tax resident of a high-tax state
- You’ve incurred expensive medical and dental bills in the last year
- You donate a substantial amount to charity
- You don’t mind spending more time on your taxes if it means reducing your liability as much as possible
Interaction with the Foreign Tax Credit & Foreign Earned Income Exclusion
The United States offers a couple of dedicated tax breaks for Americans abroad, and virtually all expats who qualify for them can benefit from them. In some cases, expats may be able to combine the standard deduction or itemized deductions with these tax benefits. Here’s how it works:
The Foreign Earned Income Exclusion (FEIE)
The FEIE lets expats exclude a portion of their foreign earned income from US income taxes. For tax year 2024, they can exclude up to $126,500. To qualify, they must meet one of two tests:
- The Physical Presence Test: Spend 330 days outside of the US in a 365-day period overlapping the tax year
- The Bona Fide Residence Test: Have been an official resident of a foreign country for an entire tax year, and be able to prove it with documentation (e.g. residence permit, foreign income tax return) if requested
Expats with foreign earned income under the FEIE limit and no other source of income typically have no taxable income. As a result, they’re generally not able to claim the standard deduction or itemized deductions on top of the FEIE.
However, expats with foreign earned income exceeding the FEIE limit — or with passive income, which the FEIE doesn’t cover — could benefit by claiming the standard or itemized deductions as well.
The Foreign Tax Credit (FTC)
The FTC, on the other hand, provides expats with dollar-for-dollar US tax credits on any legal foreign income taxes they’ve paid that are legal and assessed in their name. Expats living in a high-tax country often not only erase their US tax liability with the FTC, but also receive carryforward credits to use in the future. In such cases, they would not be able to make further deductions.
Expats living in countries with lower taxes than the US, however, would likely still have an income tax burden even after applying the FTC. In that case, the standard deduction could indeed come in handy.
Tip:
Expats who still have taxable income after applying the FEIE/FTC and the standard deduction/itemized deductions may be able to reduce it further by making qualifying retirement contributions, harvesting tax losses, and claiming depreciation.
Craft an ideal tax strategy with Bright!Tax
The standard deduction and itemized deductions can both be powerful tools to reduce your taxable income. Itemized deductions tend to be better for those with high eligible expenses, while the standard deduction is best for those seeking a simple solution.
At the end of the day, though, the only way to know which is better with certainty is to calculate and compare the standard vs. itemized deductions. If you need help deciding between the two — and crafting a more optimal tax strategy in general — Bright!Tax is here for you.
Resources:
- Topic no. 551, Standard deduction
- IRS provides tax inflation adjustments for tax year 2024
- Publication 4491: Itemized Deductions
- Mortgage Interest Tax Deduction: Definition, What Qualifies
- Topic no. 503, Deductible taxes
- Charitable contribution deductions
- Publication 529 (12/2020), Miscellaneous Deductions
