Taking the standard deduction may seem like the easier option when filing your taxes. However, it may not be the most valuable to you in the long run. Itemizing your deductions may lower your taxes owed. You can determine which method works best for you by figuring out the amount of each deduction method. In general, the bigger the deduction, the lower your taxes. The best practice is to use the method that requires you to pay the least amount of taxes owed. Use these five tips from the IRS to determine which method is the right choice:
- Calculate itemized deductions: You can do this by totaling all deductible expenses you incurred throughout the year including: Home mortgage interest, charitable gifts, property taxes, income or sales tax, medical expenses, and employee expenses that are unreimbursed.
- Compare to the Standard Deduction: The standard deduction is dependent on your filing status as follows: Single $6,200, Married Filing Jointly $12,400, Head of Household $9,100, Married Filing Separately $6,200, Qualifying Widow(er) $12,400. The standard deduction may be higher for taxpayers who are blind or older than 65, whereas the deduction is lower if you are claimed as a dependent.
- Know the Exceptions: In some cases, you are not eligible to claim the standard deduction. An example is in cases where one spouse itemizes on a separate return. You are required to itemize as well, though you usually pay less tax that way anyway.
- File Correctly: Make sure you use the correct forms when filing your taxes. If you itemize, you’ll need to add a schedule A, Itemized Deductions to your Form 1040. Standard deductions can be claimed directly on the Form 1040.
