Generally, it is easier to just choose the standard deduction when filing your tax return, however it may not be the best method for saving you money. In some cases, opting to itemize your deductions can actually lower the amount of taxes you owe. The best option is to determine the amount you will save with each deduction method, and opt for the choice that reduces the amount of tax you owe. Follow these tips to make an educated choice about which deduction method to use when filing:
First, calculate your itemized deductions by adding up all the expenses you accumulated throughout the year which are eligible for deduction. These can include home mortgage interest, property taxes, medical expenses, unreimbursed employee expenses, income and sales taxes, and donations made to charity.
Next, see how the total amount of itemized deductions compares to the standard deduction. For 2016, the standard deduction is based on your filing status like so: Single, Married Filing Separately, $6,300, Married filing Jointly, and qualifying widow(er), $12,600 and Head of Household, $9,300. If you are blind or over the age of 65, the standard deduction may increase. It may decrease if you are claimed as a dependent by another taxpayer.
In some cases, the standard deduction doesn’t apply, and therefore you are ineligible to claim it. If your spouse choses to itemize on their separate return, you must also itemize. Generally, this lowers your taxes anyway, but it’s important to be aware of when you can and can’t use the standard deduction.
Always ensure you have the correct forms for the deduction method you chose. If you want to itemize, you’ll need to file a Schedule A, Itemized Deductions along with your Form 1040. Standard deductions are able to be claimed directly on your tax form.