To take the standard deduction or to itemize deductions- that is the question.
If you usually take the standard tax deduction and debating on itemizing your deductions this year, then you might find yourself unsure on what deduction amount to take when filing your taxes. The answer; whatever results in a higher deduction amount.
Before creating an account to file your 2013 taxes, you can first read our guide to help decide if itemizing your deductions or taking the standard deduction is right for you;
1st: Understand if you can take the standard deduction.
Those who don’t qualify for the standard deduction include married couples file separately with one spouse itemizing deductions. In other words, if you are married filing separately and your spouse is itemizing, then you must itemize your deductions.
2nd: Learn your standard deduction amount based on your filing status.
The IRS standard deduction amounts are as follows for those under the age of 65;
- Single: $6,100
- Married Filing Jointly: $12,200
- Head of Household: $8,950
- Married Filing Separately: $6,100
- Qualifying Widow(er): $12,200.
If you are over 65 or blind, your standard deduction is higher. If you are being claimed as a dependent, your deduction amount will be limited.
For further help, you can use the IRS’s Interactive Tax Assistant tool to determine your standard deduction amount.
3rd: Calculate your itemized deduction total by adding up your deductible expenses from the year.
Itemized deductions include;
- Home mortgage interest
- State and local income taxes or sales taxes (one or the other, not both)
- Real estate and personal property taxes
- Charity gifts
- Casualty or theft losses
- Unreimbursed medical expenses
- Unreimbursed employee business expenses
There is an overall limit on certain deductions including taxes paid, interest paid, gifts to charity, job expenses and other miscellaneous deductions. To learn more, refer to IRS Publication 17.
4th: After figuring out what your standard deduction and itemized deduction amounts will be, compare and pick the larger of the two.
5th: If itemizing your deductions, be sure not to forget any possible deductions which you qualify for.
While reporting your itemized deductions when filing, you may have questions on what specifically you can and cannot deduct, our tax experts will be able to help you. It’s also good to know, in the case that you are audited by the IRS, you’ll need to show records or receipts of your expenses if you itemized your deductions.
In the big picture, the most important thing to remember is that tax deductions reduce your taxable income. A lower income amount means a smaller tax bill.
Whether you are itemizing your deductions or taking the standard deduction, you can file your 2013 return on RapidTax. Our application is designed to make the filing process quick and easy regardless of what deduction you are taking.
Don’t wait any longer to file your 2013 taxes, create a RapidTax account and get your tax return out of the way today!
3/10/2014 Photo via opensource.com on Flickr
