- Days left

When Does it Make Sense to Itemize Your Taxes?

Around tax time, many taxpayers struggle with whether it makes sense to itemize. The answer is almost always purely financial. In most cases, you will opt to itemize deductions if the total of those deductions is larger than your standard deduction.



For the tax year 2010, the standard deduction is $5,700 for single taxpayers or for those married filing separately; $11,400 for married taxpayers or qualifying widow(er)s; and $8,400 for heads of household. If the total of your itemized deductions is greater than the deduction for your filing status, then it usually makes sense to itemize (some exceptions apply, so keep reading).

Use Schedule A on a federal form 1040 to figure your itemized deductions. It's important to note that you cannot use a form 1040-EZ or a form 1040A; you can read more about forms in the 1040 series here.Who's More Likely to Itemize?

There are some taxpayers who are more likely to itemize than others, though this is certainly fact and circumstance specific. Here are a few taxpayer profiles that might find itemizing advantageous:

Homeowners. You can deduct qualified mortgage interest secured on a main or second home, which makes the deduction especially attractive for new homeowners or those who have recently refinanced their mortgages. Additionally, you can deduct real estate taxes paid. The combined totals of mortgage interest and real estate taxes push many homeowners over the standard deduction, making it practical to itemize.

Self-Insured. The threshold for medical expenses is fairly high -- you can deduct only the part of your medical and dental expenses that exceeds 7.5% of your adjusted gross income (AGI). So, as an example, if your AGI was $40,000, you could only deduct medical and dental expenses that exceed $3,000. If your medical expenses were $5,000, then you could claim a $2,000 deduction. That sets the bar fairly high. However, with health insurance premiums skyrocketing these days, those taxpayers who pay their own health insurance premiums in total or in part may reach the threshold fairly quickly.

Donors. Making charitable donations isn't usually enough on its own to make sense to itemize, though combined with other deductions, it may still qualify. However, donating big ticket items (like a car) or a number of smaller items in one year could be enough to push you over the standard deductions. Keep your receipts throughout the year so that you can easily determine how much -- and to whom -- you made a donation.

Big Spenders. If you live in a city or state that charges a high rate of sales tax, like Chicago, or if your city or state charges quirky sales taxes, you may benefit from those taxes come tax time. You have the option of deducting sales tax on your income tax return. If you pay a lot in tax -- or if you made a lot of big ticket purchases in 2010 -- itemizing on your federal income tax return might make it a bit less painful.

Victims of Federal Disasters. 2010 was a crazy year for weather. There were a number of federally declared disasters. Taxpayers who live in those areas may qualify for certain tax breaks, including casualty losses. Depending on the nature of those losses, they can really add up, making itemizing more attractive.

Nonresident or Dual-Status Aliens. Nonresident or dual-status aliens aren't eligible for the standard deduction. In that case, you should try to itemize your deductions, assuming you qualify.

Who Might Not Want to Itemize?

Taxpayers Filing Married Filing Separately. When you file married filing separately (as opposed to married filing jointly), even though you are filing separate returns, you and your spouse must agree that you will both itemize your deductions or that you will both claim the standard deduction. You may not file one way and your spouse file another, so talk it over before you file.

Seniors. If you're a senior, you're certainly eligible to itemize your deductions if you otherwise qualify. However, keep in mind that you are entitled to a higher standard deduction if you're age 65 or older at the end of the year.

Blind Taxpayers. As with seniors, if you're blind on the last day of the tax year, you're entitled to a higher standard deduction. You qualify if you are totally or partially blind.

If you're not sure whether you have enough deductions to itemize, and you're not otherwise prohibited from claiming the standard deduction, run the numbers and see what happens. Your tax professional or tax software should be able to walk you through the steps and help you make the best decision for your individual situation.


Increase your money and finance knowledge from home

Building Credit from Scratch

Start building credit...now.

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

TurboTax Articles

Tax Tips for the Blind

Anyone whose field of vision falls at or below 20 degrees, who wears corrective glasses but whose vision is 20/200 or less in his best eye, or who has no eyesight at all, meets the legal definition of being blind and is eligible for certain tax deductions.

What is Form 4255: Recapture of Investment Credit?

When is a tax credit not a tax credit? When the IRS takes it back. If you're in the situation where you have to file IRS Form 4255, you might have to pay back a tax credit you've earned in prior years. This process, known as recapture, occurs if you claim a credit -- in this case, a credit for a specific type of business investment -- and then no longer qualify for that credit.

The Most Important Tax Forms for ALEs (Applicable Large Employers)

In 2015, some parts of the Affordable Care Act specifically apply to businesses, in particular, large employers. The Employer Shared Responsibility provisions affect companies with 50 or more full-time employees or an equivalent of part-time or seasonal workers. These companies are called Applicable Large Employers, or ALEs. 2015 is considered a transition year as everyone gets used to the new normal for workplace health plans.

Employer Sponsored Health Coverage Explained

The Affordable Care Act, also known as Obamacare, is simpler than some people may give it credit for. The basic rule to remember is that everyone must carry Minimum Essential Coverage (MEC) or pay a penalty. Employers with 50 full-time employees or more are obligated to sponsor plans for their workers to help them meet this requirement.

How to Report RSUs or Stock Grants on Your Tax Return

Restricted stock units (RSUs) and stock grants are often used by companies to reward their employees with an investment in the company rather than with cash. As the name implies, RSUs have rules as to when they can be sold. Stock grants often carry restrictions as well. How your stock grant is delivered to you, and whether or not it is vested, are the key factors when determining tax treatment.

Add a Comment

*0 / 3000 Character Maximum