Most people with simpler returns take the standard tax deduction. But for many, itemizing can mean real savings. Before you decide what you should do, take a look at the dollar amounts and limits for this year's deduction.
• Describes the standard deduction.
• Lists the dollar amounts that can be deducted based on filing status.
• Explains deduction adjustments that may apply to you at tax time.
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Think of the standard deduction as the average amount of expenses an individual or family has over the course of the year that the IRS allows you to deduct.
If you believe you have spent more than the average or, in tax lingo, more than the standard deduction for your filing status, then you can elect to total your deductible expenses and claim them all. This is called itemizing.
If you're like most of us, you probably don't want to spend more time completing your tax return and, since taking the standard deduction is less time consuming than itemizing, it would be beneficial to know whether itemizing your deductions saves you any money before you spend the time doing it.
Although there is no simple answer to whether you should itemize of not, look over the list of each expenses listed below:
• high medical and dental bills
• state and local taxes
• home mortgage and investment interest
• charitable contributions
• casualty or theft loss
• job-related costs
If, during the past year, your expenditures under any of these categories were high, you should itemize. If they were not, then taking the standard deduction is more than likely the best choice for you.
To claim the standard deduction, no extra form in needed. Simply enter the appropriate standard deduction for your filing status on your tax return.
There are two adjustments made to the standard deduction. If you are over 65 or blind, the standard deduction is increased by $1,000 (or $1,200 if your filing status is S).
This adjustment is per person and per qualification. This means, for example, that a married couple both over 65 and one blind would be able to claim the standard deduction for married filing jointly plus an extra $1,000 each because they are both over the age of 65 plus another $1,000 because one is blind.
Their total standard deduction would be $7,850 + (2 x $1,000) + $1,000 = $.
The standard deduction for dependents is more complicated. On a dependent's tax return, the standard deduction is either $1,000 or the dependent's earned income plus $350 (whichever is greater). Earned income includes wages, salaries, fees, and other compensation for services. It also includes scholarships that count as income.
If the dependent's earned income plus the $350 is over the dependent's standard deduction amount, then the standard deduction amount is taken. A dependent's calculated deduction (earned income plus $350) cannot exceed the standard deduction for the dependents filing status.
If you claim the increased standard deduction because of blindness or age, then you can not file a 1040-EZ You must either use the 1040A or the 1040.
Also if you are Married Filing Separately, you can not use the standard deduction if your spouse it itemizing. You must file using the same method.
You can get more information about miscellaneous tax deductions directly from the IRS, in the form of IRS Publication 529
If you file a paper tax return, you will also need to fill-in the appropriate line on your Schedule A. If you e-file, all of this work will be done for you automatically.