*SHOULD YOU ITEMIZE? *
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses, and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2006, they are:
· Single $5,150
· Married Filing Jointly $10,300
· Head of Household $7,550
· Married Filing Separately $5,150
Some taxpayers have different standard deductions. The standard deduction is more for taxpayers age 65 or older and for those who are blind. It is generally less for those who can be claimed as a dependent on some other taxpayer’s return.
Limited itemized deductions. Your itemized deductions may be limited if your adjusted gross income is more than $150,500 or $75,250 for Married Filing Separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses, gambling losses, and investment interest.
Stipulations for Married Filing Separately. When a married couple files separate returns and one spouse itemizes deductions, the other spouse must also itemize and cannot claim the standard deduction.
Some taxpayers are not eligible for the standard deduction. They include nonresident aliens, dual-status aliens, and individuals who file returns for periods of less than 12 months.
Forms to use. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.
DON’T FORGET: Sometimes it pays to alternate between the standard deduction and itemizing. If your Real Estate tax is all that puts your itemized deductions above the standard deduction, then you might pay your 2006 tax in January 2007 and pay your 2007 tax in December 2007. This would not be advisable if you have enough to itemize even if you had no real estate tax.
LINKS and Other IRS References and Resources
This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.