Deciding Whether or Not You Should Itemize Your Deductions
When it comes to reducing your tax burden, itemizing deductions may be the way to go. The standard deduction is certainly easier, and might be a better option if you have a simple tax situation or don’t own a home, but if you determine that itemizing is right for you, it could lead to substantial savings.
Itemizing vs. Standard Deduction
The amount you can deduct is based on your filing status. number of dependents, and what year you’re filing the taxes for. For additional information on the standard deduction, see IRS Publication 501 .
When you itemize deductions, you have the ability to deduct the actual dollar amount of individual deductions. Some of these deductions come in the form of mortgage interest. property taxes, medical expenses. and more. If you think that if you totaled up all of your allowed
deductions and it would be greater than the standard deduction, it would probably be wise to itemize.
What Expenses Can be Itemized?
Should You Itemize?
There is no right or wrong answer, and it ultimately depends on your situation. To determine if itemizing would be worthwhile, you should take a look at Schedule A of Form 1040 .
The largest deductions for most people come in the form of mortgage interest and property taxes, and in these situations, even a modest mortgage could put you over the standard deduction limit. Since this can total into the thousands of dollars over the standard deduction. the tax savings can be significant. While this can be a big deduction, keep in mind that just because you own a home it doesn't mean the mortgage tax deduction is better than the standard deduction.Source: financialplan.about.com