Method of Deduction (23) shall be indicated by taxpayers who are engaged in a business or profession. To provide this information, the taxpayer must choose between two radio buttons: optional standard or itemized (default). The choice made in the return is irrevocable for the taxable year covered.

Optional Standard Deduction – 40% maximum of taxpayer’s gross sales or receipts shall be allowed as deduction in lieu of the itemized deduction. These deductions shall not be allowed for non-resident aliens who are engaged in trade or business. An individual who opts to avail this deduction doesn’t need to submit the Account Information Return (AIF)/Financial Statements.

Itemized Deduction – Serving as your default deduction method once you didn’t choose between any of the radio buttons, there should be an allowed deduction from gross income of all ordinary and necessary expenses that were paid during the taxable year, which can be carried on, or are directly attributable to the development, management, operation and/or conduct of the trade, business or exercise of a profession including a reasonable allowance for salaries, travel, rental and entertainment expenses.