When you start planning early, you have time on your side to help you compare between various options and choose the best for yourself. While filing your tax return, you usually have a choice of whether to itemize deductions or take the standard deduction. Before you choose, it’s a good idea to figure your deductions using both methods. Then choose the one that allows you to pay the lower amount of tax. The one that results in the higher deduction amount often gives you the most benefit.
The IRS offers these six tips to help you choose:
1. Figure your itemized deductions. Add up deductible expenses you paid during the year. These may include expenses like:
Special rules and limits apply. Visit IRS.gov and refer to Publication 17, Your Federal Income Tax for more details.
2. Know your standard deduction. If you don’t itemize, your basic standard deduction depends on your filing status (each year the numbers change, be sure to know this year’s numbers by going to www.irs.gov):
Your standard deduction is higher if you’re 65 or older and/or blind. If someone can claim you as a dependent, that can limit the amount of your standard deduction.
3. Check the exceptions. Some people don’t qualify for the standard deduction and therefore should itemize. This includes married couples who file separate returns when one spouse itemizes.
4. Use the IRS’s ITA (Interactive Tax Assistant tool) to help determine your standard deduction.
5. File the right forms. To itemize your deductions, use Form 1040 and Schedule A, Itemized Deductions.
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