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When you prepare your taxes each year, you’re faced with a decision – itemize deductions or take the standard deduction? Most of the time it’s not a question of whether you can itemize, but rather should you itemize.
Most Anyone Can Itemize…
This is due to the fact that most anyone can itemize. If you’ve paid state and/or local income or sales taxes, real estate taxes, or paid mortgage interest, you have deductions to itemize. Same goes for charitable contributions. All of these items that you’ve paid out are eligible to be deducted on Schedule A of your tax return, without a lower limit.
If you have medical expenses, these can be deductible if the total of your medical expenses are more than 10% of your Adjusted Gross Income (AGI). For 2013 tax returns, if you’re 65 years of age or older, your medical expenses that are more than 7.5% of your AGI will be deductible.
In addition, certain job expenses and other miscellaneous expenses, such as tax preparation expenses, safe deposit box rental, and the like, can be deductible to the extent that they exceed 2% of your AGI.
If you’ve paid out any of these expenses during the tax year, you can itemize. That doesn’t mean that you should itemize, though.
… But Should You Itemize?
So you’ve determined that you have deductible expenses and you can itemize – let’s look at reasons why you should itemize.
The initial answer is really rather simple – if the total of all the deductible items that you’ve found to put on your Schedule A is greater than your applicable Standard Deduction, then you probably should itemize. The Standard Deduction is based upon your Filing Status (2013 figures):
| Filing Status | Standard Deduction | Over Age 65 or Blind, per Person |
| Single | $6,100 | + $1,500 |
| Married Filing Jointly | $12,200 | + $1,200 |
| Head of Household | $8,950 | + $1,500 |
| Married Filing Separately* | $6,100 | + $1,200 |
| Qualifying Widow(er) | $12,200 | + $1,200 |
If someone else claims you as a dependent on his or her tax return, your Standard Deduction is the lesser of $1,000 or earned income plus $350, up to the normal Standard Deduction for your filing status.
If your deductions amount to less than the Standard Deduction for your filing status, don’t despair. It’s not as if being able to itemize your deductions is some sort of bonus – it’s actually the other way around. You see, if you have more deductions when itemizing than the Standard Deduction, that means you had to pay out that money during the year. On the other hand, if you had fewer itemized deductions (or no deductions to itemize), you’re getting to reduce your taxable income by the Standard Deduction without having to pay out that money!
Now there is at least one circumstance when you’re required to itemize your deductions, and we’ll cover that next.
Or, Do You Have to Itemize?
*If you and your spouse file separate returns with filing status of Married Filing Separately and your spouse itemizes deductions on Schedule A, you are also required to itemize your deductions on Schedule A, or take a Standard Deduction of $0.
Wrapping it up
You can always choose to itemize your deductions even if they are less than the Standard Deduction for your filing status. You only need to mark the box on Line 30 of Schedule A. You might want to do this if it would somehow benefit your state income tax, for example.
Lastly – the only way to itemize deductions is by also filing your tax return on Form 1040. If you choose to use either Form 1040A or Form 1040EZ, you are not eligible to itemize your deductions. If you use tax return preparation software (or your qualified preparer does) the decision will be made for you, more than likely.