Tax Deductions (Do You Use Standard or Itemize)

Do you standarize or do you itemize when it comes to deductions on your tax return?  Unless you have deductions over $11,900 (Married), 5,950 (Single and married filing separately), you more than likely take the standard tax deduction.  You can still itemize if you would like if the deductions are less than $11,900 ($5,950) but why would you.  It like saying you can pay more in taxes if you would like as a donation to the Federal Government, but few people do.  The standard deductions are tied to inflation and change from year to year.  For 2012, the standard deduction was increased  by $300.  Tax deductions are different from tax credits.

Tax deductions decrease taxable income while tax credits decrease the tax owed.  The tax deductions that can be taken on Schedule A are:

Medical Expenses > 7.5% of taxable income

State and Local Taxes

Property Taxes

Mortgage Interest & Points (becomes limited for interest on a $1,0000,000 (married) (500,000 (single)) mortgage loan)

Mortgage Insurance Premiums

Investment Insurance

Charitable Contributions

Casulty and Theft Losses

Unimbursed Employee Expenses > 2% of Taxable Income

Tax Preparation Fees > 2% of Taxable Income

Safe Deposit Box > 2% of Taxable Income

Investment Expense > 2% of Taxable Income

Other Misc Deductions

For planning taxes to lower your tax bill,  itemizing your tax deductions can help lower your taxable income thus lowering your tax bill.  So do you itemize or do take the standard deduction when it comes to taxes?






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