Should I Itemize My Deductions?

Knowing how to fill out a tax return takes a lot of skill and knowledge. There are programs available to assist you, but many times the lack of personal interaction leads to missed deductions or inaccurate returns. One of the most pressing questions when you file your return is whether you should itemize your deductions, or take the standard deduction. The right choice will lead to a lower tax liability, and can mean more money in your pocket when your refund arrives. To figure out the best route to take, use a knowledgeable tax preparer or legal tax specialist. Arming yourself with basic knowledge is also beneficial. In this regard, it is critical to have an understanding of what deductions are subject to be itemized.

The standard deduction is a method of arriving at a final determination of your taxable income by entering a pre-determined figure for your filing status. On the other hand, itemizing your deductions allows you to add up certain categories of expenses incurred over the year and deduct the total figure from your taxable income. Common things itemized by taxpayers generally consist of:

• Expenses associated with homeownership, such as mortgage interest paid and real estate taxes.
• Other taxes, such as state and local income taxes paid and withheld from your pay check.
• Monetary donations made to charities, or gifts of personal items that you have tracked.
• Taxes for items of personal property, such as an automobile or mobile home.
• Certain out of pocket medical expenses.
• Expenses associated with operating a business. Included in this category are things like the cost of travel, office supplies and equipment, licensing fees, and continuing education expenses. Particular care should be given in this area. If you are considering claiming these deductions on your personal return. The IRS considers many of these items “suspect” and it is far better to address them on a separate business return.

Before choosing a method, run the numbers by figuring the impact on your tax bill under each calculation. By comparing what you owe when using the standard deduction versus itemizing your deductions you can see what is most beneficial. And, because it is common to overlook what you can and cannot itemize, it is best to use a trained professional when making the calculation. When in doubt over whether something is deductible, you should speak with a competent legal tax professional to be sure you are not taking a deduction to which you are not entitled. 

For more information about the difference between the standard deduction and itemizing your deductions, or to learn what deductions are available to you, call our office for help. Let the professionals at Nielsen Law Group help you negotiate with the IRS. Call (480) 888-7111 or submit a web request here.