Itemize or Choose the Standard Deduction
Date posted: February 28, 2017
Most taxpayers claim the standard deduction when they file their federal tax return. However, some filers may be able to lower their tax bill by itemizing. Find out which way saves the most money by figuring taxes both ways.
The IRS offers the following six tips to help taxpayers decide:
1. Use IRS Free File
Most taxpayers qualify to use free, brand-name software to prepare and file their federal tax returns electronically. IRS Free File is the easiest way to file. Free File software helps taxpayers determine if they should itemize. It files the right tax forms based on the answers the taxpayer provides. Free File software does the math and allows the user to e-file the tax return – for free.
Taxpayers can check on other e-file options if they can’t use Free File.
2. Figure Your Itemized Deductions
Taxpayers need to add up deductible expenses they paid during the year. These may include expenses such as:
- Home mortgage interest
- State and local income taxes or sales taxes (but not both)
- Real estate and personal property taxes
- Gifts to charities
- Casualty or theft losses
- Unreimbursed medical expenses
- Unreimbursed employee business expenses
Special rules and limits apply. Visit IRS.gov and refer to Publication 17, Your Federal Income Tax, for more details.
3. Know The Standard Deduction
If a taxpayer doesn’t itemize, then the basic standard deduction for 2016 depends on their filing status. If the taxpayer is:
- Single – $6,300
- Married Filing Jointly – $12,600
- Head of Household – $9,300
- Married Filing Separately – $6,300
- Qualifying Widow(er) – $12,600
If a taxpayer is 65 or older, or blind, the standard deduction is higher than the previous amounts. The deduction may be limited if the taxpayer can be claimed as a dependent.
4. Check the Exceptions
There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if the taxpayer is married filing a separate return and their spouse itemizes. In this case, the taxpayer’s standard deduction is zero and they should itemize any deductions. See Publication 17 for more on these rules.
5. Use the IRS ITA Tool
Go to IRS.gov and use the Interactive Tax Assistant tool. It can help determine whether a taxpayer can use the standard deduction. It can also help a filer figure their eligibility for certain itemized deductions.
6. File the Right Forms
For a taxpayer to itemize their deductions, they must file Form 1040 and Schedule A, Itemized Deductions. Filers can take the standard deduction on Forms 1040, 1040A or 1040EZ.
All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
(This is a reprint of Internal Revenue Service / IRS Tax Tip 2017-17)