Tax Tip: Itemizing V.S. Standard Deduction

Here are some tips from the IRS ( talking about steps that you can take to deciding whether you want to itemize your deductions or just use the standard deductions.  You want to end up using the deduction method that will net you the highest tax benefit.

1. Figure your itemized deductions.  Add up the cost of items you paid for during the year that you might be able to deduct. Expenses range from home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.

2. Know your standard deduction.  The standard deduction amount depends on your filing status. For 2012, the basic amounts are:

• Single = $5,950
• Married Filing Jointly  = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900

3. Apply other rules in some cases. If you are 65 or older, blind or are claimed as a dpeendent on someone else’s tax return, your standard deduction will be higher. Other rules apply if someone else can claim you as a dependent on his or her tax return. Use the worksheet in the instructions for Form 1040, U.S. Individual Income Tax Return to figure out the amount.

4. Check for the exceptions.  If you are married and you are filing a separate return and with your spouse itemizing their deductions, you do not qualify for the standard deductions. See the Form 1040 instructions for the rules about who may not claim a standard deduction.

Whichever method gives you and your family the greater tax benefits, that’s the one you need to use.  Remember though, each one requires different paperwork.  For itemized deductions, you use form 1040 and Schedule A and stanardized deductions use forms 1040, 1040A or 1040EZ.

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