When it comes time to pay their taxes, many Americans are always trying to find ways to reduce their liabilities, and the most common way to do this is often via deductions. However, there are many kinds of deductions for which the average person may be eligible that they don't even know about, and as such it might be wise for them to take some time to think about whether they should itemize.
Most Americans simply take the standard deduction, which is a set dollar amount the Internal Revenue Service uses to give consumers a little more flexibility with their tax bills, based on a number of different factors. However, while most people are perfectly wise to take that deduction - in some cases it might even exceed what they're actually able to qualify for - others might have a tax filing situation that's a bit more complicated, and in these cases, itemizing is often a good idea. Further, many people aren't even eligible for the standard deduction (those who are married filing separately, and whose spouse is claiming itemized deductions as well is likely the most common of these).
What are some of the biggest reasons to itemize?
As a general rule, there are a few things that are going to increase the importance of itemizing for consumers more so than others. Perhaps chief among these is the fact that they might have paid interest or taxes on their mortgages that exceeds the standard deduction for the year, or dealing with a significant amount of business expenses for which their employers did not reimburse them. Other common causes of these kind of deductions include people who had a large amount of medical and dental expenses that were not covered by insurance. This is also true of people who suffered significant casualty or theft losses. Finally, those who made sizable donations to charitable organizations will likely also benefit.
The maximum for these itemized deductions are all quite high, which may be of value to those with significant reasons to itemize in the first place. For a person filing as head of household, it's $275,000. It's $250,000 for people filing as single, $150,000 each for people married filing separately, and $300,000 for those married filing jointly.
However, because itemizing deductions is such a complicated process, it's often wise for consumers to work closely with a professional at their local tax office before filing taxes, so as to avoid any potential issues that might arise.
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