How do you know if should itemize or take the standard deduction? First of all, what is the difference? The standard deduction is a fixed dollar amount that reduces your taxable income and varies according to your filing status. On the other hand, itemized deductions are made up of a list of eligible expenses. You can claim whichever lowers your tax bill the most.
Itemize or take the standard deduction?
It’s a question many ask and don’t understand. Here are a few tips to give you an understanding and figure out if you’ll qualify or not. Don’t forget to make sure to file the right form for your situation. If filing itemized deductions, you can file Form 1040, 1040A or 1040EZ. Remember, all taxpayers should keep a copy of their tax return and supporting documentation.
Standard deduction rates:
If a taxpayer doesn’t itemize, then the basic standard deduction for 2017 depends on filing status. If the taxpayer is:
Single – $6,3050
Married Filing Jointly – $12,700
Head of Household – $9,370
If a taxpayer is 65 or older, or blind, the standard deduction is higher than the previous amounts. The deduction is limited if the taxpayer can be claimed as a dependent on someone else’s return.
Figure Your Itemized Deductions:
Taxpayers need to add up deductible expenses they paid during the tax year. If these expenses are larger than your standard deduction rate, then you can itemize and get a larger deduction on your federal income tax.
These may include expenses such as:
- Home mortgage interest (can include your RV interest, if any)
- State and local income taxes OR sales taxes (but not both) – Make sure to keep receipts for larger items purchased in a tax year. Items like an RV or auto might make your sales tax greater than income tax in that year.
- Real estate and personal property taxes (taxes on vehicles are personal property)
- Gifts to charities (both cash and goods) – Make sure you have receipts
- Casualty or theft losses
- Unreimbursed medical expenses – This includes co-pays for dentists, doctors, hospital visits, medical equipment, prescription medications and even mileage to and from a doctor’s office.
- Unreimbursed employee business expenses – This includes travel expenses, mileage, union dues, uniform costs and more
Special rules and limits apply. Talk to your tax professional to learn more about your unique situation.
Check for Exceptions:
Married Filing Separate is the biggest exception. The law does not allow a person to claim the standard deduction if one spouse itemizes. In this case, the taxpayer’s standard deduction is zero and they should itemize any deductions. See your tax professional for help on this.