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:
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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.
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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.
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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) 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 -
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
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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.
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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
October 11 — Employees who work for tips
If you received $20 or more in tips during September, report them to your employer -
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October 14 — Everyone
Federal Holiday (Columbus Day) -
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October 15 — Individuals
If you have an automatic 6-month extension to file your income tax return for 2018, file Form 1040 and pay any tax, interest, and penalties due -
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October 15 — Corporations
File a 2018 calendar year income tax return (Form 1120) and pay any tax, interest, and penalties due. This due date applies only if you timely requested an automatic 6-month extension
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October 15 — Partnerships
Electing large partnerships: File a 2018 calendar year return (Form 1065-B). This due date applies only if you were given an additional 6-month extension -
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October 15 — Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in September.
October 31 — Certain small employers
Deposit any undeposited tax if your tax liability is $2,500 or more for 2018 but less than $2,500 for the third quarter.
October 31 — Federal unemployment tax
Deposit the tax owed through September if more than $500.
October 31 — Social security, Medicare, and withheld income tax.
File Form 941 for the third quarter of 2019. 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 November 10 to file the return.