Who Should Itemize Deductions Under New Tax Plan

And if someone can claim you as a dependent, you get a smaller standard deduction. Taking the standard deduction makes the tax-prep process relatively quick and easy, which probably is one reason most taxpayers take the standard deduction instead of itemizing. Itemizing is a way to pick and choose your tax deductions. Here’s how it works and how to tell if it’s for you. Not all charitable contributions can be deducted on your tax return. Know what you can and can’t claim to maximize your potential tax savings.

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• Home mortgage interest is deductible on the first $750,000 in loans.
• However, fines and penalties paid as restitution, remediation, or to come in compliance with a law may be deductible.
• Claiming the standard deduction is certainly easier.

Thanks to the higher standard deductions, this may no longer be necessary. The surviving itemized deductions include several categories like medical expenses, mortgage interest, and charitable donations. Software, it’s probably worth the time to answer all the questions about itemized deductions that might apply to you. The software or your advisor can run your return both ways to see which method produces a lower tax bill. Even if you end up taking the standard deduction, at least you’ll know you’re coming out ahead. Federal estate tax on income in respect of a decedent.

Home-Equity Loan or Line of Credit Interest

Before the Tax Cuts and Jobs Act, according to IRS stats, more than 30% of taxpayers itemized. The IRS says that, in general, your federal income tax will be lower if you take the larger of either your itemized deductions or the standard deduction. You might be able to easily estimate whether your itemized deductions could possibly be bigger than the standard deduction . If the standard deduction will be larger, there’s no need to calculate your itemized deductions—or save all those receipts.

If the total dollar amount of your itemized deductions is less than your standard deduction, it may not make sense to itemize. If you anticipate your itemized deductions will be slightly higher than your standard deduction, the time it takes to itemize https://kelleysbookkeeping.com/ may not be worth it. The IRS notes that taxpayers with considerable expenses from uninsured medical and dental care or paid mortgage interest may benefit from itemizing. An itemized deduction is a qualified expense that can help you reduce your AGI.

Standard Deduction Vs Itemized Deductions: Which Is Better For You

Let’s say you’re married filing jointly, and you itemize $26,900 in deductions. That’s $1,000 more than the standard deduction, but that doesn’t mean you’ll save $1,000 in taxes. Remember, deductions are subtracted from your taxable income. Other common itemized deductions include state income taxes, local income taxes, personal property taxes, and disaster losses.

You mean I can deduct my medical and dental expenses from my income? First, there’s a whole list of items that are Standard Deduction Vs Itemized Deductions not approved. Second, you can’t deduct any insurance premiums that were already deducted from your paychecks.

Pros of itemized deductions

• If you paid more than 7.5% of your adjusted gross income for out-of-pocket medical expenses, you might be able to deduct the amount above 7.5%. The standard deduction amount varies depending on your income, age, whether or not you are blind, and filing status and changes each year; see How Much Is My Standard Deduction? Janet Berry-Johnson is a CPA who writes about income taxes, small business accounting, and personal finance. She lives in Omaha, Nebraska, where she enjoys cooking, reading, and spending time outdoors with her husband, son, and their rescue dog, Dexter. The standard deduction is a flat amount determined by the IRS based on your filing status.