In this post we would like to discuss different types of deductions and circumstances which can influence the taxpayer’s decision whether to itemize or not.

Each taxpayer can use either standard deduction or itemized deductions. However, you are not always allowed to make the choice by yourself.

IRS prohibits using standard deduction for certain categories of taxpayers. Some of the examples are presented below:
If you are non-resident or dual-status resident  you are not allowed to use standard deduction.

If married spouses file separately and one of them itemizes deductions, the second spouse is prohibited from using standard deduction.

Is the amount of standard deduction equal for every taxpayer?

Of course, not!

The amount of standard deduction depends on your filing status, age (whether you are 65 or older), whether you are blind and whether another taxpayer claim you as a dependent.

The amount of standard deduction for each category of taxpayers is adjusted for inflation on the annual basis.
In certain cases you may want to itemize instead of using standard deductions.

You should itemize deductions if your allowable itemized deductions are greater than your standard deduction or if you must itemize deductions because you can’t use the standard deduction.

Below is the list of most common itemized deductions:

• Medical and dental expenses exceeding 7.5% of your Adjusted Gross Income (AGI)
• State and local taxes up to $10,000 ($5,000 if Married filing separately)
• Home mortgage interest and points (up to certain limits)
• Charitable contributions (up to certain limits)
• Casualty and theft losses (only in the Federally declared disaster areas)
• Gambling losses (but only up to reported gambling winnings) etc.

The total amount of itemized deductions can be much higher than standard deduction.

The IRS data shows a clear trend: the higher a household’s income is, the more likely it will itemize deductions.

However, in some cases individuals itemize irrespective of their income, usually when some unwanted and unexpected circumstances arise, such as payment of large uninsured medical bills or having high uninsured casualty or theft losses from a Federally declared disaster.

As you can see, there is no uniform answer to the question if one should itemize. It really depends on each household’s unique circumstances.

We strongly recommend you seek professional tax help to maximize your tax deduction. Click here to contact us.