Should You Use the Standard Deduction or Itemize?

Depending on your filing status and overall financial situation, you and your family may benefit from itemizing deductions instead of taking the standard deduction for your filing status. You want to deduct as much as possible from your adjusted gross income, or AGI, so you'll be required to pay less tax.

A simple math calculation will determine which type of deduction is better for you. If your total qualified itemized expenses exceed the standard deduction, you would benefit from submitting a Schedule A, Itemized Deductions, with your tax return. The not-so-simple part comes in knowing which expenses qualify for deduction. The tax doctor can help.

The main expenses that suggest using a Schedule A are mortgage interest and sizeable medical and dental expenses, but there are other deductible expenses that you may not have considered in the past. The tax doctor can help you sort and classify your expenses so your best legal tax position can be filed with the IRS.

Importance of Correct Tax Filing Status

The standard deduction differs for taxpayers who qualify as single, married filing jointly, married filing separately, head of household, or qualified widow/widower. On Schedule A you can tally certain types of expenses that can be deducted from your AGI. Deductible expenses are defined by Federal statute, but even the basic categories require interpretation for many taxpayers. For tax planning and preparation, the tax doctor can help you determine which of your expenses can be itemized. However, to be meaningful the itemized deductions need to be compared with the correct standard deduction for your filing status. See the tax doctor to be sure where you stand.

Deductible Expenses

A major deductible expense for homeowners is home mortgage interest, which is reported to the IRS on a Form 1098-INT by the mortgage lender. The taxpayer also receives a copy. Starting in 2008, mortgage interest can be deducted even if the taxpayer does not use a Schedule A.

Deductible medical and dental expenses include out-of-pocket costs associated with visits to the doctor or dentist. This category also includes radiographic (X-rays, digital imaging, etc.), dental care, eye care, pharmacy medicines, chiropractic, other traditional and alternative medical-related costs, as well as mileage traveled to and from these services. Pretax health insurance premiums cannot be deducted, but other qualified medical insurance premiums can be deducted.

Also deductible are documented cash and other-than-cash gifts to charity, as well as mileage when performing charitable activities. Beginning in 2008, all cash contributions must be documented on the letterhead of the recipient organization, even cash placed in the offering plate, perhaps in an envelope showing your name and address.

Casualty and theft losses, job expenses not reimbursed by the employer, union and professional dues, tax preparation fees and tax software costs, and miscellaneous other qualified expenses can be deducted on Schedule A. The tax doctor can help.