After you've determined your filing status, the next step is to reduce your taxable income. The tax system doesn't tax you on every single dollar you earn. Instead, it lets you subtract a certain amount from your income first. This subtraction is called a deduction.

Think of it as a discount on your income. The lower your taxable income, the less tax you'll owe. There are two ways to claim deductions: you can take the standard deduction or you can itemize your deductions. You have to choose one path; you can't do both.

The standard deduction is a specific dollar amount that you can subtract from your income. It's the simpler of the two options, and for that reason, it's what most people use.

The amount you can deduct depends on your filing status, age, and whether you are blind. The government sets these amounts, and they are usually adjusted each year for inflation. It's a straightforward way to reduce your taxable income without having to track every single deductible expense.

If the standard deduction is the simple path, itemizing is the more involved one. Itemizing means you list out all your individual deductible expenses for the year. If the total of these expenses is more than your standard deduction amount, you might save money on your taxes by itemizing.

So, what kind of expenses can you itemize? The list is long, but some of the most common ones include:

To itemize, you need to keep detailed records and receipts for all the expenses you plan to claim. You report these on a form called Schedule A, which you file with your tax return.

The decision is purely about the numbers. Which option saves you more money?

Let's look at an example. Suppose you are single, and your standard deduction is $13,850. You add up your potential itemized deductions for the year:

• Mortgage Interest: $7,000
• State and Local Taxes: $5,000
• Charitable Donations: $1,000

Your total itemized deductions would be $13,000.

In this case, your standard deduction ($13,850) is higher than your itemized deductions ($13,000). You would be better off taking the standard deduction to get a larger tax benefit.

For most people, especially after tax law changes in recent years increased the standard deduction amounts, the standard deduction is the better choice. However, if you own a home, live in a high-tax state, or make significant charitable donations, it's always worth adding up your itemized deductions to see if you can lower your tax bill further.

Choosing the right deduction method is a key part of filing your taxes accurately and making sure you don't pay more than you need to.