|Taxes (Photo credit: Tax Credits)|
As you prepare your tax return, you have a decision to make about your tax deductions – you can choose between itemizing and using the standard deduction. But how do you choose?
The Standard Deduction is just what it sounds like – a standardized deduction that you can choose to utilize by default, and you don’t have to do a lot of recordkeeping through the year in order to use the the standard deduction. In order to itemize deductions, you need to save receipts from various deductible expenses through the year, and use those to prepare your itemized return.
The IRS recently published their Tax Tip 2012-43, which has some good information to help you with this choice. Oftentimes it is a foregone conclusion, once you understand the differences between itemizing and the standard deduction. Below is the text of the Tax Tip.
Standard Deduction vs. Itemizing: Seven Facts to Help You Choose
Each year, millions of taxpayers choose whether to take the standard deduction or to itemize their deductions. The following seven facts from the IRS can help you choose the method that gives you the lowest tax.
- Qualifying expenses – Whether to itemize deductions on your tax return depends on how much your spent on certain expenses last year. If the total amount you spent on qualifying medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions is more than your standard deduction, you can usually benefit by itemizing.
- Standard Deduction amounts– Your standard deduction is based on your filing status and is subject to inflation adjustments each year. For 2011, the amounts are:
- Single, $5,800
- Married Filing Jointly, $11,600
- Head of Household, $5,800
- Married Filing Separately, $5,800
- Qualifying Widow(er), $11,600
- Some taxpayers have different standard deductions – The standard deduction amount depends upon your filing status, whether you are 65 or older or blind and whether another taxpayer can claim an exemption for you. If any of these apply, use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions.
- Limited itemized deductions – Your itemized deductions are no longer limited because of your adjusted gross income. Note from jb: previously, at higher levels of income a taxpayer’s itemized deductions could be limited. This limitation has been eliminated – but it could come back for future tax years.
- Married Filing Separately – When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.
- Some taxpayers are not eligible for the standard deduction – They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.
- Forms to use – The standard deduction can be take on Forms 1040, 1040A, or 1040EZ. To itemize your deductions, use Form 1040, US Individual Income Tax Return, and Schedule A, Itemized Deductions.