It’s tax season and you just want the quickest way out without watching the IRS rip your wallet in half. With your taxes, you have two choices: standard deduction or itemized deductions. You would probably avoid the latter considering all the stress you’ve been through already. Wouldn’t it just be easier to use the standard method? Well, taxpayers, you can reap benefits from taking the extra time to itemize your deductions.
For the average person, one would fall in one of these standard deduction categories:
1. Single taxpayers = $5,700
2. Married taxpayers (joint return) = $11,400
3. Head of household taxpayers = $8,400
Your first benefit of itemizing rather than taking the standard would occur if you have a home equity mortgage on your home. You should always fill out a Schedule A form in January, wait for your mortgage bill, and then check to see if your mortgage interest is higher or lower than your standard deduction. If the interest on your mortgage is larger than your standard deduction then you should, without a moment’s hesitation, go for the itemized deduction path (you’ll save big time!)
Next, even if you do not own a home, you should explore possible deductions from your never ending income taxes. All you have to do is compare the sum of what you paid in city and state taxes for the year compared to your standard deduction. (You can find your total on your W-2 forms).
If you made contributions to any sort of charitable donation you will only be able to file for deductions on them if you choose itemized deduction. There are two important things you should remember when you decide to deduct your donations. Number one, by law, you must have a receipt or cancelled check to prove any contribution, no matter the size. Number two, do not overestimate your donations, try to get as close to right as you possibly can, or face consequences later.
Some, though very few, will be able to make medical related tax deductions. This will only apply if you are: a) having un-reimbursed expenses that exceed 7.5 percent of your Adjusted Gross Income (AGI) or b) would like to deduct premium expenses for you health and insurance, which is not covered by an employer using pay roll reduction with pre-tax dollars.
Finally, here are some more deductions you may be eligible for; just take the sum of the ones you can use and compare it to two percent of your AGI:
1. Dues paid to a union/professional organization
2. Work related magazine subscriptions
3. Work clothing expenses
4. Cost of work tools
5. Medical examinations required for employment
6. Tuition for classes related to your current job
7. Fees you face trying to get a job in your normal field
8. Financial institution charges that maintain your IRA account
9. Safe deposit box rental for stocks, bond, or other investment files
10. Any expenses faced while getting help filing your taxes
11. Most legal fees regarding protection of income (excludes divorce-related fees)
So take some time to review your potential itemized deductions, you just may end up with money in your pocket!
Biblio/Special Thanks to: http://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/Tax-Deduction-Wisdom-Should-You-Itemize-/INF12061.html