As tax season approaches, you are probably trying to think about every possible way to maximize your taxable deductions. Although deductions have the potential to yield a larger return, most people choose to go with the standard one-size-fits-all deductions, as opposed to itemizing their deductions themselves. Out of those who choose not to itemize their deductions, 25% end up paying more taxes because of their deduction method.
Should You Opt for Itemized Deductions or Go With the Standard Deductions?
Before you can determine whether or not itemized deductions are best for you, you need to understand the difference between itemized and standard deductions. Standard deductions are generic figures based on your income, age, and filing status. In 2016, the standard deductions for single individuals, as well as married individuals filing separately, was $6,300. The standard deduction for married individuals filing jointly was $12,600. (These were deduction amounts for the majority of citizens, however, certain factors can impact these figures for a small group of individuals).
Itemized deductions use only specifically applicable deductions in an effort to maximize your return or reduce the amount of taxes you have to pay. If itemizing your deductions results in a larger deductible amount than the standardized deduction rate, than itemizing is in your best interest.
Not everyone is eligible for the standard deduction. If you are married and filing separately, you can only use the standard deduction if your spouse is not itemizing their deductions on their filing. Non-resident aliens or those who have had a dual-status citizenship during the year are also ineligible to use the standard deduction.
When in doubt, contact a professional with experience when it comes to tax deductions. Whether you need advice regarding how to maximize your deductions, how to file on your own, or you would like to leave the job up to someone else, the professionals at Litzler, Segner, Shaw, & McKenney have the knowledge and expertise to help you tackle all of your tax issues.