Do you like jumping through hoops? Filling out itemized deductions on a Schedule A is very similar. Trying to figure out if you can itemize your taxes (Schedule A) is like jumping through hoops. And it is not just one hoop it is several.
Let's start with the biggest hoop - Should you take the standard deduction or itemized deductions?
Everyone is entitled to a full standard deduction (with a small exception for dependents). The amount of the standard deduction depends on your filing status. Here are the standard deductions for 2010:
Single or Married Filing Separately - $5,700
Head of Household - $8,400
Married Filing Joint or Qualified Widow(er) - $11,400
So, the biggest hoop is whether or not your itemized deductions exceed the amount for your filing status. What are itemized deductions? Here is a list:
- Medical Expenses that exceed 7.5% of your AGI (Adjusted Gross Income) (another hoop)
- State and Local Income Taxes OR General Sales Tax (not a hoop, but close)
- Real Estate Taxes
- Personal Property Taxes (vehicle taxes as long as based off the value of the auto)
- Home Mortgage Interest and Points
- Qualified Mortgage Insurance if the loan was originated after 2006 (another hoop)
- Charitable Contributions (cash, checks, credit card or goods such as clothing and computers)
- Casualty or theft losses that exceed 10% of your AGI (another hoop)
- Job Expenses and Certain Miscellaneous Deductions that exceed 2% of your AGI (Adjusted Gross Income) (another hoop)
Once you total up all of the deductions listed above, if it is above the standard deduction great!! You will be able to deduct the itemized total on your tax return. If your itemized deductions are less than the standard deduction, don't worry, you will still be able to take the standard deduction.
Keeping good records is critical for itemizing deductions. Some itemized deductions have very straightforward documents such as mortgage interest or mortgage insurance (on Form 1098) and property taxes (receipt from your local tax office).
One deduction overlooked and not documented well enough is contributions of clothing and household items to Goodwill, Salvation Army, etc. When you donate these items you can deduct the value that these items would sell for in their resale store. Make sure you document how many shirts, (men's or women's; short or long sleeve; etc), the version of the computer donated, etc. Here is a link to Goodwill's valuation guide for donated items.
So, if you are up for jumping through hoops, you can get a bigger refund on your tax return. It just takes good documentation and patience.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.