The IRS gives taxpayers a choice of using the standard deduction or an itemized list of qualified deductions to calculate their taxable income. For taxpayers with large mortgages or charitable donations, it's a no-brainer; they come out ahead by itemizing. For others, it boils down to a question of whether it's worth the trouble of sifting through all their records and receipts.
To put things in perspective, the standard deduction for 2015 will be $6,300 for single filers, $12,600 for those married filing jointly. If you or your spouse are over 65 or blind, the standard deduction is a little higher. So if your total mortgage interest, property taxes, and charitable donations are normally less than those figures, you will probably be better off with the standard deduction.
But that's not the end of it. If you have a large out-of-pocket medical
bill in one year, it might tip the scale toward itemizing. Only qualified
medical expenses exceeding 10% of your adjusted gross income (AGI) are
deductible, but the threshold is 7.5% of AGI through 2016 if you are age 65 or
older. After 2016, it's 10% for everyone. If you think you will qualify for a
medical expense deduction this year, consider adding other deductions such as
extra charitable donations before December 31 to maximize your tax savings.
Take note that if someone else can claim you as a dependent, you cannot
take the full standard deduction, so you might be better off itemizing. Another
wrinkle: Itemized deductions are limited when income reaches $258,250 for
single filers, $309,900 for married filing jointly.
Keeping track of potential
itemized tax deductions may be unnecessary in your situation, but before you
make that call speak with a tax professional.
