Sponsored Links
For many people there is a lot of confusion as to what itemized deductions are and whether you should take them on your tax return. First it is important to understand that if you take itemized deductions you cannot take the standard deduction. So the question really is what will get you more money on your income tax return at the end of the year.
A standard deduction is a preset amount based on the size of your family, your filing status, current deduction amounts and if you are blind, your age or both. Itemized deductions are a collection of all your allowable deductions for the year. Deciding which deduction to take means doing the numbers and determining which deduction is bigger. For most families with lower incomes and dependants the standard deductions are almost always higher unless you have a large number of medical bills or losses due to theft or casualty.
If you are over 65 or are blind or both you are allowed to take addition amounts for one or both, the amount is a set amount set by law, and is based on filing status. You can take the addition amounts for a spouse that is listed as an exemption on your tax return as well.
To take the itemized you should have more deductions as allowed by law than your standard deduction but this requires understand what exactly is deductable at the end of the year. Allowable deductions include medical expenses, state and local taxes, property taxes, home mortgage and investment interest, charitable contributions, theft and casualty losses and job expenses.
If the combine total of all of these deductions is higher than your standard deduction you are better off itemizing for that year. Some allowed itemized deductions have limits that are based on your income so be sure to take that into account when you are determining which deduction to take.
In certain circumstances you will not be eligible to take the standard deductions but will be required to take the itemized deductions. Reasons why you will be required to take the itemized deductions include being nonresident aliens, dual status aliens, and those that file returns for less than a 12 month period. Also if your spouse itemizes and you file separate returns you must also file an itemized return.
Understanding the difference between itemized and standard deductions can mean owing less to the tax man and possibly even getting back a bigger return, so it pays to do the math and know your options.