In Itemizing Taxes, Extra Effort Earns Savings
- March 31st, 2015
- Comments Off on In Itemizing Taxes, Extra Effort Earns Savings
Most Americans opt for a standard deduction on their tax return without considering an alternative. Itemizing taxes, however, can offer taxpayers big savings.
Itemizing taxes requires more effort in bookkeeping before tax day, but a larger refund check is the payoff.
Itemized deductions differ from standard deductions, because they include a range of expenses that are not otherwise tax-deductible. Some are forced to itemize, because they are ineligible for a standard deduction.Remember, if you are choosing to itemize your taxes, you will be forfeiting the standard deduction. Therefore, be certain that the total of all your itemized deductions adds up to more than the standard deduction for your tax bracket. If not, itemizing taxes will cost you money.
Top deductions for itemizing taxes
Big hearts can earn big write-offs. For those who donate to charities significantly, itemizing taxes can result in a larger return. Beware, these deductions only apply to donations for which you have receipts.
High tax burden
In states with high state and local tax burdens like New York and California, itemizing taxes can be the right call. On an itemized return, state and local property taxes are deductible from a federal return.
A significant “casualty loss,” a theft or property damage not covered by insurance, might be a good reason for itemizing taxes. The IRS grants a tax break for property loss hardships above a certain level.
For new homeowners with recent loans, itemizing taxes may be your best bet. New homeowners are eligible for an itemized deduction, because the first few years of a new home loan is almost entirely comprised of interest payments.
Those with severe health issues, who were forced to pay big out-of-pocket costs for health care, would likely save more with an itemized deduction.
Ineligible income brackets
Those taxpayers with income above this threshold are ineligible for itemizing taxes:
- Single: $254,200
- Married filing jointly; qualifying widow or widower: $305,050
- Married filing separately: $152,525
- Head of household: $279,650
Other disqualifiers include:
- A married individual who files as married but files separately than a spouse who chooses to itemize deductions.
- An individual who files a tax return for less than 12 months.
- An individual who was a nonresident alien or a dual-status alien during the year.
JRH & Associates, Inc., is an accounting, tax, and business consulting firm backed by over 20 years of experience. If you have any further questions about whether itemizing taxes is right for you, or any other accounting questions, please feel free to call JRH Associates at 516-794-5752.