The IRS doesn’t often give you options. But they do allow you to choose between taking the standard deduction or itemized deductions on your income tax return. The more deductions you can take, the more your total tax bill may be reduced.
The standard deduction is a flat dollar amount you can subtract from your taxable income and is based on your tax filing status. For the 2018 tax year, the standard tax deductions are:
- $6,500 for single filers and married filing separately
- $9,550 for head of household
- $13,000 for married filing jointly
Choosing the standard deduction may make sense for you if you don’t have expenses such as mortgage interest or property taxes.
Standard deduction or itemized deductions? When deciding which to use on your tax return typically it’s best to choose the method that results in the larger deduction and lowers your taxes.
Your alternative to the standard deduction is to calculate itemized deductions using Form 1040 Schedule A. Itemized deductions require you to keep records, statements or receipts. Examples of eligible expenses include:
- Mortgage interest
- State and local taxes including income taxes and property taxes
- Eligible medical costs exceeding 10 percent of your adjusted gross income (AGI)
- Charitable contributions donated to qualified charities or organizations
- Property casualty and theft losses that exceed 10 percent of your (AGI)
- Gambling losses up to the amount of gambling income
- Business expenses
Choosing to itemize deductions may make sense for you if the total of all your expenses adds up to more than this year’s standard deduction. This approach may lower your taxes even more.
If you feel comfortable preparing your own taxes or plan to hire a professional, be sure to consider if a standard deduction or itemized deduction makes sense for your situation. When it comes to tax preparation, LGFCU offers low-cost tax help in-person at a branch nearest you. Or, take advantage of the TurboTax discount available to members, if you prepare your own taxes online.
The advice provided is for informational purposes only. Contact your tax advisor for additional guidance.