Itemized vs. Standard Deduction

When we finish preparing a client’s tax return, sometimes he or she is confused about whether the medical expenses were deducted or if their charitable deductions applied.  When preparing your tax return, you have a choice whether to itemize deductions or take the standard deduction.

Before you choose, it’s a good idea to figure your deductions using both methods, and then choose the one that allows you to pay the lower amount of tax. The one that results in the higher deduction amount often gives you the most benefit.

We do this every time we prepare a return for a client in order to legally minimize the tax burden, and if possible, maximize your tax refund.  Here are some of the figures and reasoning behind deductions.

Add up deductible expenses you 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.  For example, in order to claim deductions for unreimbursed medical expenses, those which are not covered by health insurance, they must exceed 10 percent of your adjusted gross income.

Know your standard deduction.  If you don’t itemize, your basic standard deduction for 2013 depends on your filing status:

• Single $6,100
• Married Filing Jointly $12,200
• Head of Household $8,950
• Married Filing Separately $6,100
• Qualifying Widow(er) $12,200

Your standard deduction is higher if you’re 65 or older or blind. Also, if someone can claim you as a dependent, that can limit the amount of your deduction.  Some people don’t qualify for the standard deduction and therefore should itemize. This includes married couples who file separate returns and one spouse itemizes.

If your itemized deductions end up totaling less than the standard deduction, we apply the standard deduction to your return, in order to maximize your refund or minimize the amount you owe. Questions? Schedule an appointment online or call us at 469-374-3150.