When you prepare your federal income tax return, you must choose between using the standard deduction or using itemized deductions. There is not an option whereby you can use both in the same tax year.
When there are so many tax laws to consider and understand about how to prepare your taxes, how do you know whether using the standard deduction or itemized deductions is best for your situation?
This article provides an overview of the key things to consider in making the decision between the standard and itemized deductions.
Situations Where You Cannot Use the Standard Deduction
There are certain situations where the decision to the use the standard deduction or itemized deductions is taken out of your hands, because tax laws do not allow you to use the standard deduction. Situations where you cannot use the standard deduction include the following:
- You are married, you are using the married filing separately tax status, and your spouse is electing to use itemized deductions.
- You are filing a tax return for less than a 12 month period.
- You are a non-resident alien or dual-status alien rather than a United States resident.
In addition, tax returns for certain entities rather than individuals cannot use the standard deduction. Those entities include estates, trusts, trust funds, and partnerships.
Itemized Deductions Provide a Greater Tax Benefit than does the Standard Deduction
If you can use the standard deduction, you should use itemized deductions on your tax return if they provide a greater tax benefit than if you use the standard deduction. An individual will typically receive a greater tax benefit from using itemized deductions rather than the standard deduction if one or more of the following are true:
- Spent a significant amount on medical or dental expenses that were not covered by insurance
- Own a home on which you pay property taxes, as well as have a home mortgage for which you pay mortgage interest
- Spent a significant amount on employee-related business expenses that were not reimbursed
- Had a significant casualty loss or theft that was not covered by insurance
- Paid city, county, and state income taxes
- Had gambling losses, at least to the extent they are less than any gambling winnings reported as taxable income
- Made significant charitable contributions
- Paid for other qualifying expenses
You can determine your amount of itemized deductions by completing the appropriate tax schedules based on your information. Once you complete the forms, it is simply a matter of comparing the itemized deduction amount against the standard deduction amount and choosing the larger of the two numbers, as that will provide you the greatest tax savings.
Keep in mind that the standard deduction amount can vary based on your filing status and your age.
Limitations on Itemized Deductions
If you are able to use itemized deductions, you should keep in mind that certain categories of itemized deductions cannot be claimed unless they exceed the threshold defined in the Internal Revenue Code. In addition, if your income is above a certain threshold based on your filing status, your itemized deductions as a whole may be phased out.
How do I get help with claiming itemized deductions on my tax return?
If you need help with questions about itemized deductions or other aspects of filing your tax return, you should get the help of a tax attorney. A tax attorney will have the knowledge and experience to determine whether the standard or itemized deductions are right for you.
You can get help from a tax attorney by calling the phone number located at the top of this web site or complete the form that follows. The first conversation with a tax attorney is free of charge. All discussions with your tax attorney are completely confidential.
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Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.