February 10, 2015
Often, taxpayers have to choose between itemizing their deductions and taking a standard deduction when they are filing their taxes. A taxpayer should determine what their deductions amount to using both methods, and then choose which option decreases the amount of tax that they owe. Typically, the method that leads to the largest deduction will provide the biggest credit.
How to Determine Itemized Deductions:
First, taxpayers have to figure out the total amount of all of their deductions individually, in an itemized list. Any expenses that someone paid during the year can include:
What is the Standard Deduction?
If taxpayers choose not to itemize their deductions, they can go for the standard option, which is based on their filing status. For 2014, the standard deduction is as follows:
If taxpayers are over 65 years of age, or they are legally blind, the standard deduction rate is higher. Also, if taxpayers are able to be claimed as a dependent by anyone else, they may find their deduction is limited.
Which to Use?
Taxpayers have to check the requirements for each deduction option, as some taxpayers don't qualify for a standard deduction, and are forced to itemize. "If a married couple files separately, and one spouse chooses to itemize, the other spouse may also be required to do so." explained Paul Stanley of eTax.com. "When deciding which option to choose, taxpayer should carefully determine which method they are eligible for and which will result in the highest benefit."