US taxpayers are eligible for a number of deductions at the time of filing federal tax returns. Surprisingly, most taxpayers use the standard deduction amount, unaware of the fact that itemizing their returns may help them lower their tax liabilities. Therefore, before you go ahead and file a standard tax return, you must calculate your taxes using both the methods – standard and itemized deduction – to find out the more beneficial option. To help, here are a few things that you must know when calculating the deductions.
Standard Deductions
Taxpayers, based on their filing status, are eligible for different standard deductions from their tax bills. The basic standard deduction applicable for 2015 is as follows:
- Unmarried single or married (but filing separately) – $6300
- Head of the household – $9250
- Qualifying Widow(er) – $12,600
- Married Couple (filing jointly) – $12,600
The standard deduction amount that taxpayers aged 65 years or older can claim is higher than the above mentioned amounts. The same is applicable for visually challenged taxpayers.
When Itemizing is the Only option
In certain exceptional cases, taxpayers cannot claim a standard deduction, and the only option they have is to itemize the return. Itemization becomes essential for a taxpayer, if:
- Their filing status is “married filing separately”, but their spouse itemizes deductions
- They file a tax return for a short tax year due to a change in their annual accounting period
- They are treated as a “nonresident” or “dual-status alien” during the tax filing year
Note: A Non-resident alien married to a US citizen or resident alien, may however, claim a standard deduction, if they choose to be treated as a U.S. resident. For more information, you may visit the official site of the IRS.
Itemized Deductions
Standard deduction is no doubt an easy way out, but if someone wants to get a larger tax refund, they must add up their deductible expenses to find out if the total of their itemized deduction is more than the applicable standard deduction. Expenses that may be deducted include:
- Medical Expenses
- Interest paid on home mortgage
- Points (Charges paid to obtain a home mortgage)
- Real estate and personal property taxes
- Deductible taxes (State and local income taxes or sales taxes, but not both)
- Losses due to theft or casualty
- Employee Business Expenses (Unreimbursed expenses such as travel, mileage, seminars)
- Gifts to charities
To figure out other itemized deductions, you may use Schedule A (Form 1040).
Need Expert Help?
Taxpayers can use IRS Free File software to determine if itemizing saves them more on taxes compared to standard deductions. Based on your inputs, the software will do the math, file the right tax forms and e-file your return. If you still have any questions or doubts about standard deductions and itemized deductions, or need professional help in filing your returns, contact The Law Offices of Nick Nemeth to get a professional CPA referral or fill out our Free Tax Analysis form and we will get back to you right away.
