Most people claim the standard deduction when they file their federal tax return. But did you know that you may lower your taxes if you itemize your deductions? Find out if you can save by doing your taxes using both methods. Usually, the bigger the deduction, the lower the tax you have to pay. You should file your tax return using the method that allows you to pay the least amount of tax. The IRS offers these five tips to help you choose:
1. Figure your itemized 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. Visit IRS.gov and refer to Publication 17, Your Federal Income Tax, for more details.
2. Know your standard deduction. If you don’t itemize, your basic standard deduction for 2014 depends on your filing status:
Single $6,200
Married Filing Jointly $12,400
Head of Household $9,100
Married Filing Separately $6,200
Qualifying Widow(er) $12,400
If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.
3. Check the exceptions. There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if you are married filing a separate return and your spouse itemizes. In this case, you can’t claim a standard deduction. You usually will pay less tax if you itemize. See Pub. 17 for more on these rules.
4. Use the IRS ITA tool. Visit IRS.gov and use the Interactive Tax Assistant that takes you through a series of questions just like one of our customer service representatives would. The tool can help determine your standard deduction. It can also help you figure several of your itemized deductions.
5. File the right forms. To itemize your deductions, use Form 1040 and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.