How to Compare Standard and Itemized Tax Deductions

The government allows a standard deduction of $5,150 for each person to take off of their income when filing their taxes. The other option is to itemize your deductions and add up the total of all money that you spent during the year that is tax deductible. While it might be tempting to take the standard deduction it is possible that you may owe less taxes if you itemize.

Difficulty: Moderate

Instructions

1. Learn what is deductible. The most common itemized deductions are interest on a mortgage or home equity loan, property taxes, state income tax and charitable donations. Medical expenses are deductible if they exceed 7.5 percent of your adjusted gross income. There is also an assortment of other miscellaneous deductions.

2. Gather your receipts and records. You will need to be able to substantiate your itemized deductions in the event of a tax audit.

3. Complete IRS form 1040 Schedule A. Enter the figures for all of your expenses that fall into any of the tax deductible categories.

4. Compare the final figure for total itemized deductions on Schedule A to the government allowed standard deduction.

5. Choose the larger of the two figures for use on your taxes to lower the amount of money that you owe the Federal Government of increase the size of your tax refund.

Tips & Warnings

• If you use a home version of a tax preparation software they will provide a complete list of all eligible deductions to help you to choose standard or itemized.