When tax time comes around, it’s often difficult to determine whether you should opt for the standard deduction or for an itemized deduction. What is a seemingly tiny distinction could actually be the difference between thousands of dollars in tax savings. It’s important to make a quick scan of your fiscal year to figure out whether you should take one or the other.
So, where should you look?
Medical Expenses
In the unfortunate event that you needed to spend an exorbitant amount of money over a fiscal year to pay medical bills, consider itemizing your deductions. If your medical expenses totaled over 7.5% of your income, you start saving more money by itemizing the medical deductions than by taking the standard deduction.
Charity
One no-brainer that people often overlook is charitable giving. Look over your charitable contributions over the past year. Was this a particularly generous year? Itemize those charitable gifts. You’ll find that they quickly add up, and you’ll be able to lower your tax bill by itemizing charitable contributions.
Work-Related Fees
Did you spend 2% or more of your income on work-related fees? These fees can come in a number of different stripes, from work uniforms to union dues; office supplies to equipment. If you spent a decent amount of your income on work expenses, itemize them! You’ll be sure to save some money from the throes of the taxman.
Itemizing your deductions won’t necessarily save you money, but it’s worth it for certain budgets. Make sure to consult a tax professional when itemizing your expenditures just to be safe, though. The last thing you want is to fail an IRS audit due to being too zealous with your itemized deductions.
You can save thousands of dollars by being wise with your deductions. It’s a step that many taxpayers simply overlook, but it’s worth the time and effort. All it takes is a quick glance through your finances. Do you fit the above categories? Then itemize your deductions. If not, standard deductions will suffice.
This is a guest post by Greg Minton, who wrote this article for TaxMattersSolutions.com, which helps people with IRS problems.
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{ 4 comments… read them below or add one }
Don’t forget your looking for a job expenses and your moving to a new job, if the mileage is far enough away…
I heard that unless it’s usually not worth the trouble to itemize unless you have a mortgage and property tax deduction. Even at that, the mortgage needs to be big enough to cover the standard deductions.
Honestly, I’m totally an outsider in the tax deductions. Hence, I mostly handover my tax stuff to my friend, who is working as an accountant! However, after I’ve reading your article, I might give it a try on itemize my tax deductions…
I’m not sure about this topic. Shouldn’t we always itemize b/c the standard deduction is such a low amount? We’re talking like $70,000 in deductions vs. $3,000 standard for me in some years.
If you have $60,000 in home interest income alone, it’s worth itemizing no?