This time of year, there’s a lot of tax talk at home, at work, and on TV. Some of that talk centers on whether taxpayers should “itemize” or take the “standard deduction.” Knowing the difference and which is better is important for keeping that tax bill as low as possible.
Taxpayers can itemize or take the standard deduction. Not both. Knowing how to choose comes down to these three points:
- Filing Status and Age
The standard deduction amount varies based on filing status and age. Amounts are indexed annually for inflation. For 2016, the standard deduction for a person who is single or married filing separately, and is under age 65 is $6,300. Single taxpayers age 65 and over get a $7,850 standard deduction. For married couples filing jointly, it’s $12,600.
- Getting the Most Tax Savings
Itemize deductions when the total exceeds the standard deduction. Itemized deductions include amounts paid during the year for state and local income or sales taxes, real estate taxes, personal property taxes, mortgage interest, gifts to charity, uninsured losses, and, depending on the situation, medical and dental expenses.
- Qualifying for the Standard Deduction
Some situations prevent taxpayers from using the standard deduction. For example, a married person filing separately from her spouse who itemizes cannot select the standard deduction, even if it’s higher than itemizing. Nonresident aliens, dual-citizen aliens, estates, trusts, and partnerships also do not qualify to take the standard deduction.
As usual, there’s much more to this topic than space allows here. Taxes are complicated. Consult a qualified tax professional for personalized assistance.
Need help choosing on your own? The IRS website has “Six Steps to Help You Choose” at: http://bit.ly/2mc4Exr