When deciding to itemize deductions or taking a standard deduction for the most benefit, it is important to figure your deductions using both methods first. Here are some tips to help you decide.
- Calculate Itemized Deductions. There are many types of deductions that qualify to be itemized. Common examples include home mortgage interest, gifts to charities, and un-reimbursed employee business expenses. Remember that special rules and limited apply according to Publication 17.
- Know Your Standard Deductions. These are fixed numbers which include marital status, Head of Household, and Qualifying Widow(er).
- Check Exceptions. Some individuals don’t qualify for some standard deductions and therefore should itemize. A married couple that files separate returns, as an example.
- File the Right Forms. Form 1040 and Schedule A, Itemized Deductions. Standard deduction forms are Form 1040, Form 1040A, or Form 1040EZ.
Naturally, you will want the option that makes you pay the lowest tax while benefiting from the higher deduction amount. The IRS website has an interactive Tax Assistant tool which can help you determine your standard deduction, as well as a program that can prepare and electronically file your tax return, if you’re eligible. You should seriously consider consulting tax professionals who can help you through and answer questions directly. Publication 17 is a pretty long read. Call us at 407.892.1066!