When tax time rolls around, you may find yourself with a major dilemma: Should you itemize your taxes or take the standard deduction? The good news is that you don’t have to agonize over this decision. The best approach is simply to pick whichever route nets you the biggest deduction!
The standard deduction for 2017 is $12,700 for married taxpayers who are filing jointly; for individuals and those using the married filing separately status, the standard deduction for 2017 is $6,350. Before you decide whether to take the standard deduction or to itemize, ask yourself the following questions:
- Did I, my spouse, and/or my dependents have major medical expenses this year? Medical expenses over 10% of your adjusted gross income (AGI) can be deducted, so add up all of your qualified medical expenses and subtract 10% of your AGI to determine your total eligible medical expense deduction.
- Did I pay property taxes, personal property tax, or state income tax this year? (State sales tax can also be deducted in lieu of state income tax in many cases.) Total these taxes to determine your eligible deduction for taxes paid.
- Did I pay mortgage interest this year? Owners of qualified homes can deduct eligible mortgage interest as well as mortgage insurance premiums.
- Did I make donations to qualified charitable organizations this year? Gifts of cash or goods to eligible charities can be deducted on your tax return. Add up the total value of donations to qualified charities to determine your total charitable donation deduction.
- Did I have unreimbursed occupational expenses this year? Out-of-pocket costs for work-related items, such as uniforms, that exceed 2% of your AGI are typically deductible. Total your eligible occupational expenses and subtract 2% of your AGI to determine your total occupational expenses deduction.
Now add together the totals from the five questions listed above. If that number is more than the standard deduction for your filing status, you’ll want to itemize your deductions, as the above-listed deductions can only be claimed if you itemize. If that number is less than the standard deduction, you’ll want to claim the standard deduction to minimize the tax you owe. It’s as simple as that!
Have questions about deductions and your tax return? Price Advantage Accounting is happy to help. Call now to learn more!