To Itemize or Not to Itemize, That is the Question

When you are trying to determine which filing status to use to file your return, above all things, keep in mind that it will not benefit you to itemize, if the total amount of your allowable deductions is less than the standard deduction. The amounts assigned to each filing status are adjusted over time to account for economic changes such as downturns and inflation. For TY 2008 the allowable standard deductions are:

Single                            $5,450
Married Filing Jointly            $10,900
Married Filing Separately     $5,450
Head of Household               $8,000

• Many things can influence your filing status and the decision to file using the standard deduction. You must assess what status best fits your circumstances and gives you the best outcome on your return. For example: You may be older than 65, or have a disability such as blindness, or maybe you’ve suffered a disaster loss from a federally declared disaster zone. If any of these fit your scenario, it benefit you to file using the standard deduction.
• It is imperative to figure out the amount you paid over the course of the year for such items as mortgage interest, state and local taxes, medical expenses and donations to charity. If this amount is less than the standard deduction, you should take the standard deduction. One other benefit to taking the standard deduction is that it simplifies your return and eliminates the need to keep track of all possible deductions, including and retaining necessary receipts.
• If your AGI is $79,975 and you’re filing married filing separate or $159,950 filing joint, your itemized deductions could be limited. If you and your spouse decide to file Married Filing Separately and one spouse opts to itemize deductions, the other spouse must itemize their deductions as well. One of the spouses cannot file using the standard rate, when the other does not.
• If you are a nonresident alien, dual-status alien or taxpayer filing a return for less than 12 months, you must file with an itemized schedule and cannot take the standard deduction.

In order to itemize your deductions, you will need to use Form 1040, U.S. Individual Income Tax Return, plus Schedule A, Itemized Deductions. A simple way to see if you are better off itemizing, is to use the Schedule A as a guide to list all of your allowable expenses. If this adds up to more than the standard deduction, then you would benefit from itemizing.

Remember: Although both kinds of deductions help to reduce your tax liability, always choose the one that will reduce your tax liability the most and save you money!

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