It's a crucial decision while filing your tax return – whether to go for standard deduction or claim itemized deductions. The selection depends on certain conditions and limitations applicable to you specifically. Let us first discuss about those taxpayers who cannot claim the standard deduction. The following persons can't claim standard deduction: a. Persons married and filing separately with their spouse opting for itemized deductions. So both of you can either itemize or can go for standard deduction. b. Taxpayers filing their return for a short year, because of a change in their annual accounting period. c. Taxpayers who were non-resident for part of the year or aliens having duels status for part of the year. People whose standard deduction is limited. If you are / can be claimed as a dependent on the tax return of another person, then your standard deduction is limited to $800 or $250 plus your income earned for the year, whichever is higher. In any case the amount of standard deduction cannot exceed the regular limit of standard deduction available. Standard deduction for people over 65 or who are blind If you are over 65 at the end of the year, your standard deduction will be higher. Even though on January 1 of the next year you turned 65, then you are considered of the age of 65 for the previous year. Standard deduction for blind people If you are blind during or on the last day of the year, you can claim a higher standard deduction. You can also claim higher standard deduction if you are partially blind. However, an eye doctor must certify that either your field of vision is less than 20 degrees, or you cannot see more than 20/200 with your better eye either with glasses or with contact lenses. If your spouse over 65 are a blind If your spouse is either over 65 or blind, and if you are filing jointly then you can get a higher standard deduction. How much higher? Well you can refer to a special table which is available in the instructions for Form 1040. You can also refer to IRS publication 501 to get the exact amount of higher standard deduction applicable to you. Now lets turn to the option of itemized deductions. You can go for this option if your expenses during the year under the following categories are very significant: • Your medical and dental expenses • The amount of charitable contributions you made during the year • The expenses which remain un-reimbursed from your employer • There are casualty and theft losses during the year • You pay state and local income taxes • You pay taxes on real estate or personal property taxes You should always make comparative calculation to select between the two options. If you decide to claim itemized deductions, remember the following limitations • Total expenses under itemized deductions have to exceed 7.5% of your AGI. • The expenses un-reimbursed by your employer and other miscellaneous expenses are restricted to 2% of AGI. • You need to look into the provisions of AMT (Alternative Minimum Tax) – that means if your AGI goes above a certain limit, then the overall amount of itemized deductions is limited. If your adjusted gross income (AGI) is higher, then it will be difficult for you to come about the threshold of 7.5% of AGI. If your AGI is lower and expenses are higher during the year, than it is a clear-cut case of itemizing. Every year you must calculate your taxes under bold these options to see which one is good for you. You always have a choice of filing an amended return subsequently if you find that you made a mistake in selecting a particular option. This choice is available for three years from the date you file your return.
Article Source: http://www.articlecontentprovider.com/articlesubmit
Generally the taxpayers are inclined to pick the choice of standard deduction by filing their tax return. This is because they feel it is simple and not complicated. But the standard deduction amount changes every year and it is important that you should evaluate both the options before making your choice. Take the review of your personal finance situation applying the advice given in this article and save a lot of money.
Chintamani Abhyankar is internet marketer, tax professional and freelance writer. His masterpiece, Stop donating your money to IRS is an e-book on the tax secrets which only lucky people knew in the past. His easy to implement strategies can put thousands of dollars in your pocket. Grab a copy now!
Please Rate this Article
5 out of 5 4 out of 5 3 out of 5 2 out of 5 1 out of 5
