Itemizing Deductions vs. Standard Deduction
When you file your tax return, you usually have a choice about whether to itemizing deductions or to take the standard deduction.
Tax deductions reduce your taxable income. A lower amount of taxable income reduces your tax liability. Based on your circumstances, an evaluation of claiming the standard deduction or itemizing deductions should be made in order to reach the lowest tax liability legally possible.
Before you choose, it’s a good idea to figure your deductions using both methods and choose the one that gives you the most benefit. Typically, the one that results in the higher deduction amount and allows you to pay a lower amount of tax.
Here are four tips to keep in mind while you’re deciding:
1. Figure your itemized deductions. Add up any deductible expenses that you paid during the year such as:
- Home mortgage interest
- State and local income taxes or sales taxes (but not both)
- Real estate and personal property taxes
- Casualty or theft losses
- Unreimbursed medical expenses
- Unreimbursed employee business expenses, such as travel expenses
Generally, if you have numerous itemized deductions, it may make sense to itemizing deductions instead of using the lower standard deduction. Many taxpayers choose itemizing deductions based on the amount paid for home mortgage interest and real estate property, which often will exceed the standard deduction.
Special rules and limits apply however, so be sure to request a quote below for additional details.
2. Know your standard deduction. If you don’t itemize, your basic standard deduction for 2014 depends on your filing status:
- Single $6,200
- Married Filing Jointly $12,400
- Head of Household $9,100
- Married Filing Separately $6,200
- Qualifying Widow(er) $12,400
Your standard deduction is higher if you’re 65 or older or blind. If someone can claim you as a dependent, that can limit the amount of your deduction.
3. Check the exceptions. Some people don’t qualify for the standard deduction and therefore should itemize. This includes married couples who file separate returns and where one spouse itemizes.
4. File the right forms. To itemize your deductions, use Form 1040 and Schedule A, Itemized Deductions.
Still not sure whether to itemize or take the standard deduction? No problem. Request a free quote below to get started with your tax preparation engagement and we’ll help you figure it out if itemizing deductions is the right choice for you.
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Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.