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Depending upon a taxpayer’s income, age, filing status and more, itemizing deductions on a tax return may help decrease the tax amount you owe. The benefit to itemizing adds up only if the total amount of qualified itemized deductions is more than the standard deduction.
If you don’t know the amount of your standard deduction, there is an online tool that you can use to find an estimated answer within a few minutes. Generally, the standard deduction amount depends on your filing status, whether you are 65 or older, whether you are blind and whether another taxpayer can claim an exemption for you. The standard deduction amounts are adjusted each year for inflation.
For the 2014 tax year, the standard deduction ranges from $7,750 for a single-filing taxpayer up to $17,200 for a widow(er) with dependent children.
Here are a few specific circumstances that may signal it’s time to itemize for the best tax benefit:
- You do not qualify for the standard deduction, or the amount you can claim is limited.
- You have total itemized deductions that are more than the standard deduction to which you otherwise are entitled.
- You paid interest and taxes on your home.
- You made large contributions to qualified charities.
- You had large uninsured medical and/or dental expenses during the year.
- You had large uninsured casualty or theft losses.
- You had large unreimbursed business expenses or other miscellaneous work-related deductions.
Consider that you may benefit from itemizing deductions if your standard deduction is zero and you are married filing a separate return, and your spouse itemizes deductions; or, if you are filing a tax return for a short tax year because of a change in your annual accounting period.
Also, a nonresident or dual-status alien (a person who was a nonresident and a resident alien during the same tax year such as someone who married a U.S. citizen) may find the best choice is to itemize deductions.
A taxpayer wishing to itemize their deductions on their federal individual income tax return must use Schedule A (Form 1040). The form itself can also help you determine whether your deductions will add up to an amount that provides more tax-savings than the standard deduction.
Make certain that you can support expense claims with receipts and other documentation. Filling out the forms and gathering the necessary paperwork to itemize deductions will take more time compared to choosing the standard deduction, but many taxpayers reap the rewards of the time invested in tax savings.
For more information, contact one of our tax preparation experts at McRuer CPAs.
