“Should I itemize my deductions?” “Do you take the standard deduction, or itemize?” Not to make too many assumptions here, but there’s a good chance that in the past couple of years, you’ve take the standard deduction.
And that makes sense! Following the Tax Cuts and Jobs Act of 2017, the standard deduction became a much more attractive option for taxpayers looking to maximize their tax savings. Not just because it raised the totals for the standard deduction, but also because it eliminated many favorite itemized deductions.
Now, it seems that unless you’re in very specific financial situations, the standard (See what we did there?) advice is to take the standard deduction and move along. And when you’re in a time crunch a few nights before Tax Day, you’re likely to heed that advice.
But we’re here to give you some alternative advice:
The standard deduction is right for many taxpayers, but not everyone. Before you potentially leave money on the table taking the standard deduction, consider a few things first. We’re here to offer a few basics about the standard deduction before diving into some expenses you should keep in mind while considering whether to itemize!
The standard deduction is pretty high, which is one reason why it’s such an attractive option for many taxpayers. For your 2019 taxes, the value of the deduction is as follows.
You might even get an added bump if you are 65 years or older, or if you’re blind. The added totals are as follows:
Additional Standard Deduction Values
Even if you don’t qualify for any increases in the standard deduction, the totals are already pretty high. That’s one big reason why they are so highly favored. And for many taxpayers, the standard deduction is genuinely the best way to save the most money.
However, most people just do it out of convenience. And there are a few big expenses that might lead you to itemize your deductions, instead.
When you take out a home mortgage, a portion of each monthly payment is mortgage interest. If you took out a mortgage on your home on or before December 14, 2017, the maximum amount of eligible debt for the deduction was $1 million; under the new rules, the debt is limited to $750,000. You can deduct mortgage interest on up to two homes. Depending on the size of your mortgage and your income, this can seriously benefit you if you itemize your deductions.
Did you know you can deduct certain other taxes on your federal tax return? You can! In particular, you may be able to deduct property tax, state & local income tax, or sales tax. If you’re diligent about record keeping, you might be surprised how much the sales tax alone adds up over the course of a year. Depending on the property, income, and sales taxes in your area, your taxes alone may be reason enough to skip the standard deduction in favor of itemizing.
You’d consider yourself a charitable person, wouldn’t you? Many people do, and that’s why they should keep in mind the charitable donations they’ve made when deciding between the standard deduction and itemizing. While donations alone aren’t enough to push most taxpayers beyond the value of the standard deduction, they might be able to when added to tax payments or mortgage interest payments.
Unfortunately, healthcare can be really expensive. Fortunately, your medical and dental expenses are deductible, assuming they exceed 10% of your adjusted gross income. And there are other health-related expenses that can also be deductible if you look into them. When pooled, these kinds of expenses are exactly the kind that may push you past the standard deduction and save you money.
Is the standard deduction a wonderful choice for many taxpayers? Absolutely. But should you ignore the potential of itemizing your deductions simply because it’s easier to take the standard deduction than crunch the numbers yourself? Absolutely not.
Even in a pinch, don’t ignore the potential savings of itemized deductions. Instead, get in touch with our expert tax preparation team. We’ll ask the right questions, get the right information, and get you the biggest tax refund possible. Every time.