Should you itemize or take the standard deduction? 4 things to know

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The IRS allows you to reduce your taxable income in one of two ways. The first way is by using a predetermined amount - the standard deduction. The second option is by claiming certain actual expenses, known as itemized deductions.

Here are four things you should know about itemizing deductions and taking the standard deduction:

  1. You can choose the deduction that gives you the greatest tax benefit

    As a general rule, take whichever amount is greater, the standard deduction or the total of your itemized deductions.

    Some common itemized deductions are charitable contributions, mortgage interest, property taxes, employee business expenses, and medical expenses. If the total itemized deductions are more than your standard deduction, consider itemizing.

  2. Some deductions must exceed a “floor” before you deduct them

    As of 2013, you can only deduct medical expenses to the extent that your total medical expenses exceed 10% of your adjusted gross income, known as the "floor." Your adjusted gross income, or AGI, is your taxable income before itemized deductions and exemptions.

    If you or your spouse are at least age 65 by the end of the year, you can still deduct total medical expenses that exceed 7.5% of your adjusted gross income.

    After 2016, everyone must meet the 10% floor for medical expenses before they can take a deduction.

    Your total employee business expenses and certain miscellaneous deductions must meet a 2% floor before you can take a deduction.

  3. Your standard deduction is based on filing status and other factors

    Your standard deduction is based mostly on your filing status. If you or your spouse are age 65 or older, or if one or both of you are blind, you qualify for a higher standard deduction.

    2013 Standard deduction amounts for most people (Do not use if age 65 or older, blind or if someone else can claim you)
    If your filing status is: Your 2013 standard deduction is:
    Single or Married filing separately $6,100
    Married filing jointly or Qualifying widow(er) with dependent child $12,200
    Head of household $8,950
    2013 Standard deduction amounts for people age 65 or older and/or blind
    Check the number of boxes that apply to you (or spouse if applicable)

    You: Age 65 or older     Blind

    Spouse (if claiming exemption): Age 65 or older     Blind

    If your filing status is: Number of boxes checked: Your 2013 standard deduction is:
    Single 1 $7,600
    2 $9,100
    Married filing jointly or Qualifying widow(er) with dependent child 1 $13,400
    2 $14,600
    3 $15,800
    4 $17,000
    Married filing separately 1 $7,300
    2 $8,500
    3 $9,700
    4 $10,900
    Head of household 1 $10,450
    2 $11,950
  4. Not everyone can take the full standard deduction

    You may not qualify for a full standard deduction if your parents can claim you as a dependent on their return. In that case, your standard deduction is limited to the greater of $1,000 or your earned income for the year plus $350, but not more than the regular standard deduction amount.

    You also cannot take any standard deduction if one or more of the following conditions are true:

    • You are married but you and your spouse file separate returns, and your spouse itemizes deductions,
    • You file a tax return for a short tax year because you changed your annual accounting period, or
    • You are a nonresident or dual-status alien during the year. A dual-status alien is a taxpayer who qualifies as both a nonresident and a resident alien during the year.

      Exception: If you are a dual-status alien filing jointly with your spouse who is a U.S. citizen, you and your spouse can agree to be taxed on your worldwide income and itemize deductions.

  5. Where to find your itemized deductions on your federal tax return

    If you itemize, you can find your itemized deductions and the total amount of itemized deductions you are allowed to take on Schedule A, Itemized Deductions.

    If you use the standard deduction instead of itemizing, TaxAct does not print Schedule A with your return. Instead, TaxAct gives you the standard deduction directly on Form 1040.

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Upcoming Tax Dates

January 1 — Everyone
Federal Holiday (New Year's Day) Details

January 10 — Employees who work for tips
If you received $20 or more in tips during December, report them to your employer Details

January 15 — Individuals
Make a payment of your estimated tax for 2018 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES Details

January 15 — Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in December 2018

January 15 — Farmers & fishermen
Pay your estimated tax for 2018 using Form 1040-ES Details

January 21 — Everyone
Federal Holiday (Martin Luther King, Jr. Day) Details

January 31 — All Employers
Give your employees their copies of Form W2 for 2018. If an employee agreed to receive Form W2 electronically, have it posted on a website and notify the employee of the posting.

January 31 — Individuals who must make estimated tax payments
If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040) for 2017 by January 31. Filing your return and paying any tax due by January 31 prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by January 31, file and pay your tax by April 15.

January 31 — Payers of gambling winnings
If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W2G.

January 31 — Social Security, Medicare, and withheld income tax
File Form 941 for the fourth quarter of 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until 02-10 to file the return.

January 31 — Certain small employers
File Form 944 to report social security and Medicare taxes and withheld income tax for 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more for 2018 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

January 31 — Farm employers
File Form 943 to report social security and Medicare taxes and withheld income tax for 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

January 31 — Federal unemployment tax
File Form 940 for 2018. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

January 31 — All businesses
Give annual information statements to recipients of certain payments you made during 2018 Details

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