Happy Tax Season Series: Standard Deduction vs. Itemized Deductions

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March 8, 2012 by msquaredlaw

Each year, taxpayers must 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.

1. Qualifying expenses.  The decision of whether to itemize deductions on your tax return depends on how much you 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.

2. 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:   $8,500
Married Filing Separately:  $5,800
Qualifying Widow(er):  $11,600

3. Different standard deductions for some taxpayers.   The standard deduction amount depends on 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 to you, you must use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions.

4. Limited itemized deductions.  Your itemized deductions are no longer limited because of your adjusted gross income.

5. 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.

6. Some taxpayers are not eligible for the standard deduction.  Non-eligible taxpayers 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.

7. Forms.  The standard deduction can be taken on Forms 1040, 1040A or 1040EZ.  To itemize your deductions, you must use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

If you have any questions or would like our assistance in determining whether to itemize or take the standard deduction, contact us.

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