When you file your tax return you have options. You can choose to either itemize your deductions on Schedule A or simply take the standard deduction. Before choosing it’s a good idea to figure your deductions using both methods. Then select the one that allows you to pay the least amount of taxes. The one that results in the higher deduction is most often the one that gives you the most benefit.
Here are six tips to help you decide which method is best for you.
- Figure your itemized deductions. Add up deductible expenses you paid during the year. These may include expenses such as:
- Home mortgage interest
- State and local income taxes or sales taxes (but not both)
- Real estate taxes on your personal residence
- Personal property taxes like your car registration
- Gifts to charities
- Casualty or theft losses
- Unreimbursed medical expenses
- Unreimbursed employee business expenses
Special rules and limits apply to each of these deductions. Make sure your preparer fully understands these deductions. You can get information regarding them at IRS.gov and refer to Publication 17, Your Federal Income Tax for more details.
- Know your standard deduction. If you don’t itemize, your basic standard deduction for 2013 will depend on your filing status (note this deduction often changes from year to year):
- Single $6,100
- Married Filing Jointly $12,200
- Head of Household $8,950
- Married Filing Separately $6,100
- Qualifying Widow(er) $12,200
If you are 65 or older or blind, your standard deduction will be higher. Important, if someone can claim you as a dependent on their tax return, the amount of your deduction can be limited.
- Check the exceptions. Some people don’t qualify for the standard deduction and therefore should itemize. This includes married couples who file separate returns and one spouse itemizes.
- Use the IRS’s ITA tool. Visit IRS.gov and use the Interactive Tax Assistant tool to help determine your standard deduction.
- File the right forms. To itemize your deductions, use Form 1040 and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.
One of the best ways to make sure you pick which deductions are best for you is to call us at Creative Tax and schedule a consultation. Call us at (562) 251-1300. We can help