Standard vs. Itemized Deductions

What happens when you do your taxes is that you have a total income, and then you take out a few deductions, money that you make that you don't have to pay taxes on.

And the first deductions you take out are called above the line deductions. They're things like self employed retirement accounts and self employed health insurance, those sorts of things.

And after you take those out, you arrive at a number called your adjusted gross income.

And that's usually at the bottom of the first page and the top of the second page. But it varies by year on your tax form. But after you get to your adjusted.

Gross income, you get to take one more deduction away from it to get to your taxable income. And that deduction is called the standard deduction. In 2024, your standard deduction if you are single or filing married, filing separately, is $13,850. You double that if you are filing married, filing jointly.

So it's $27,700.

You get that just for being alive and breathing.

You know, it's kind of the same reason they give you student loans in medical school. If you can get in medical school and you have a pulse, you get student loans, it's great, right? But that's what the standard deduction is.

Another option if you don't want to take the standard deduction is you can try to get a bigger deduction, and we call that itemized deductions.

And itemized deductions are listed on schedule.

A of Form 1040, and there's just a handful of them.

The first one is medical and dental expenses. However, there's a limit on these.

You basically only get the expenses that are more than 7.5% of your income.

And I think it's adjusted gross income.

All right, so that's kind of hard for doctors, right?

If your adjusted GROSS Income is $300,000, well, you got to spend more than 21,000 on those medical and dental expenses.

Before any of them are deductible. And then only the amount above that is deductible. So who really gets this as doctors? People do an ivf, you know, that.

Sort of a thing, something that's not covered. That's because typically your max out of pocket on your insurance is less than that amount for a doctor. So this isn't a real common deduction.

For people to take.

One that is very common for doctors.

Is taxes that you pay. And these include state and local taxes.

They also include your real estate taxes, your property taxes. You also get the choice, actually between your income taxes or your sales taxes. But for docs, it's almost always going to be more for your income taxes unless you're in a tax free state.

It however, there's a limit on this.

The limit is $10,000.

And you've probably heard this, it's called the salt tax limit, state and local tax. Right.

And it's $10,000 a year. And there's a lot of people that.

Are very salty about that, typically people.

Living in places that.