Itemizing vs. Standard Deductions

Itemizing vs. Standard Deduction

Which is better?

When you file your tax return, you usually have a choice whether to itemize deductions or take the standard deduction. Before you choose, it’s a good idea to figure your deductions using both methods. Then choose the one that allows you to pay the lower amount of tax. The one that results in the higher deduction amount often gives you the most benefit.

Here are six tips to help you choose.

1. Figure your itemized deductions. Add up deductible expenses you paid during the year. These may include expenses such as:

* Home mortgage interest

* State and local income taxes or sales taxes (but not both)

* Real estate and personal property taxes

* Gifts to charities

* Casualty or theft losses

* Unreimbursed medical expenses

* Unreimbursed employee business expenses

2. Know your standard deduction. If you don’t itemize, your basic standard deduction for 2014 depends on your filing status: Important, your filing status is your marital status on 31 Dec 2014.

* Single $6,200

* Married Filing Jointly $12,400

Your standard deduction is higher if you’re 65 or older or blind. If someone can claim you as a dependent, that can limit the amount of your deduction.

Be sure to hire a licensed tax professional, an Enrolled Agent, America’s Tax Expert who specializes in Individual and small business taxes.

Check the preparer’s qualifications -- Make sure your preparer is qualified. The states of IN and IL do not required Tax Preparers to be Licensed, and per IRS, over 60% of tax preparers do not have any license credentials. There are two types of licensing – CPA, licensed by the state board of accountancy, and Enrolled Agents, licensed by US Dept. of Treasury.

Check the preparer’s history -- Check your preparer’s history by conducting your own research through various sources: Enrolled Agent www.inea.bizor CPA society www.incpas.org.

Courtesy of Andrew Stadler, EA