Though standard deduction is an easy choice, there are many taxpayers who are leveraging the benefits of itemizing their tax deductions in form of reduced tax bills. If you are confused about whether to itemize the deduction or stick to a no-question-asked standard deduction, this brief read is for you. Here are some handy tips to avoid paying more taxes than you owe.
Evaluate Itemized Deductions
Identify and add all deductible expenses you paid during the year, keeping in mind that there are specific rules and regulations that may apply to specific expenses. The list includes:
- Home mortgage interest
- State and local income taxes or sales taxes
- Real estate and personal property taxes
- Gifts to charities
- Unreimbursed medical expenses
- Casualty or theft losses
- Unreimbursed employee business expenses
Determine the Basic Standard Deduction
Tax season pressure may push you to accept standard tax deduction as it is, instead of leveraging the potential benefits of itemize deductions. To know whether itemizing would be profitable for you, you need to check whether the deductible expenses exceed the standard deduction for your filing status. Standard deduction for taxpayers for year 2015 returns includes:
- Single taxpayers – $6,200
- Married taxpayers filing jointly – $12,400
- Head of Household taxpayers- $9,100
- Married taxpayers filing separately – $6,200
- Qualifying widow(er) taxpayers $12, 400
Check Your Eligibility for Standard Deduction
There are several conditions under which the law doesn’t allow taxpayers to claim the standard deduction. For example, if you are married and filing a separate return, you won’t be allowed to claim standard deduction if your spouse has opted for it. Nevertheless, you usually pay less tax when you itemize, therefore, the limitation can actually pay off in terms of lower bills.
Make Sure you File the Right Forms
Use Form 1040 and Schedule A to itemize your deductions, and for standard deductions, use Form 1040, 1040A or 1040EZ.
Must Read: A Brief Guide to Choosing the Right Tax Form
Leverage the IRS ITA Tool
You can use the Interactive Tax Assistant tool provided on IRS.gov, to determine your standard deduction. It can also help you figure several of your itemized deductions for a comparative analysis.
As they say, “half baked knowledge is dangerous”, make sure you are aware of all the ifs and buts before you file for itemized deductions; else, stick to standard deductions. You will need professional assistance to ensure you make the right decision. We, at myirsteam.com can help you decide whether you should itemize your deductions or stick to standard deductions. Feel free, to contact us for a no-obligation consultation. You can reach us at (972) 734-1171.