Often, you’ll have to choose between itemizing your deductions and taking a standard deduction when you are filing your taxes. You should determine what your deductions amount to using both methods, then choose which option decreases the amount of tax that you owe. Typically, the method that leads to the largest deduction will provide the biggest credit.
How to Determine Itemized Deductions:
First, you’ll have to figure out the total amount of all of your deductions individually, in an itemized list. Any expenses that you’ve paid during the year can include:
- Interest paid on a mortgage loan
- Either sales tax or state and local income tax (choose one)
- Charitable donations
- Loss due to theft or casualty
- Medical expenses that have not been covered by a third party
- Business or work expenses that haven’t been reimbursed
- Taxes paid on real estate and personal property
What is the Standard Deduction?
If you choose not to itemize your deductions, you can go for the standard option, which is based on your filing status. For 2014, the standard deduction is as follows:
- Single taxpayers – $6,200
- Married Filing Jointly – $12,200
- Head of Household – $9,100
- Married Filing Separately – $6,200
- Qualifying Widow(er) – $12,400
If you are over 65 years of age, or you are legally blind, the standard deduction rate is higher. Also, if you are able to be claimed as a dependent by anyone else, you may find your deduction is limited.
Which to Use?
You’ll 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. When deciding which option to choose, you should carefully determine which method you are eligible for and which will result in the highest benefit.
