People every year struggle with whether or not to itemize your deductions. But if you know how deductions work, it’s actually quite easy to know whether to itemize or not. It all comes down to whether or not your deductions will exceed the so-called “standard deduction” which every taxpayer gets by default. As of this writing, the standard deduction is $6,300 for individuals, and $12,600 for married couples. So the bottom line is that if your itemized deductions exceed these amounts for whichever category you are in, then it is in your best interest to itemize your deductions. One easy way to know whether or not you should itemize is by simply using a good tax preparation program like Turbotax (more on that later).
Before proceeding, you should make sure you understand everything that can be itemized. Many people forgo itemized deductions because they are not aware of just how many things can be deducted. To give you a brief list, here are some of the most common items you can deduct:
- Home Mortgage Interest
- Local and State Income Taxes
- Real Estate Taxes
- Medical and Dental Expenses
- Charitable Contributions
In general, higher income individuals tend to be better off itemizing deductions, as a high income usually means larger income taxes, which can be used as a major deduction. The other huge deciding factor is whether or not you own a home. If you own a home and pay a mortgage, then the interest portion of your payment is deductible, and depending on how expensive your home was, this can end up being quite a large deduction as well.
Many people will tell you to go talk to a CPA to determine whether you should itemize deductions or take the standard deductions. For most people, however, I don’t find this to be necessary. Doing taxes on your own can seem daunting, but it’s actually not that difficult if you take advantage of a user-friendly tax preparation program like Turbotax. But you don’t have to necessarily take my word. New changes to this software make it possible for you to try a Turbotax free edition (from http://freetrialspot.com/turbotax.php) on the Internet without any cost to you. By doing this, you’ll see how easy it is to prepare your taxes by yourself. The online program is free to use, but you need to buy the program if you actually decide to file your taxes using Turbotax.