You usually have two choices on your tax return:
- Itemize: You can either choose to list your specific, “itemized” deductions to reduce your taxable income, or
- Take a standard deduction (a set, minimum amount.) This amount depends on your filing status, and will be larger if you, or your spouse, are at least 65 years old and/or legally blind.
In order to know if you should file your taxes with an itemized deduction or with the standard deduction, you need to consider which one is higher, therefore giving you the best advantage on your taxes.
You cannot use the standard deduction in some situations. Those situations include:
- If you are married filing separate returns, and your spouse is using the itemized deductions
- You are filing your tax return for any period of time less than 12 months, such as for a change in your accounting method
- You are not a US citizen during the tax year
- You cannot use this is you are filing on behalf of an estate, trust, partnership or common trust fund.
Who benefits from the itemized deduction? You should itemize if you have a large, uninsured medical or dental expensive, paid a significant amount of taxes or interest on your home or had a large unreimbursed employee business expense. If you made a large deduction to a charity or had an uninsured casualty or other loss, you may also benefit from itemized deductions. Any deductions that would push your total itemized deduction amount above the standard deduction indicates it’s time itemize.
There are some limitations on itemized deductions. You are encouraged to consult with a trusted tax professional to get the most deductions legally possible.
