Should You Itemize This Tax Season?
BOSTON (CBS) – Should you take the time to fill out the long 1040? It really depends. To find out whether you should itemize you will need to do some homework.
About a third of taxpayers use the long form. The majority of taxpayers don’t have the income or the deductions to itemize, and often they won’t take the time to figure out if using their deductions is the better deal.
A study by the government found that big bucks are lost annually by taxpayers who don’t take the time to itemize. These are taxpayers who were entitled to larger refunds based on their deductions, deductions they did not utilize when they filed their returns.
The standard deduction for 2012 for a single taxpayer is $5,950, for married couples it’s twice that, $11,900, and for head of household it’s $8,700.
You can use either the standard deduction or your deductible expenses, whichever is larger. But you need to figure it out.
To do a quick assessment, is your total income under $100,000? Do you have any dependents? Interest income under $1,500? Are you under age 65? If you answered yes, yes, yes and yes you can use the short form 1040EZ. But let’s look at possible deductions.
How much did you pay in state income tax? Did you make any charitable contributions? Then add up your mortgage interest payments and real estate taxes, which you will find on form 1098 that you received from the mortgage company. If they did not pay your taxes for you, get out your check book ledger.
Do you have a new car? How much did you pay for excise tax? Did you have large unreimbursed medical or dental bills? Do you pay for your own health insurance? Now do a quick calculation, add them all up to see if the items you can deduct are larger than the standard deduction amount.
Using check writing software such as Quicken is a plus when you want to retrieve these numbers. You can easily print out a report with all of your deductible expenses making the decision process so much easier.
If your deductions are larger than the standard deduction then make the effort to use those deductions and file the long 1040. I am a firm believer in paying taxes but only what you really owe. But if you are not going to do your taxes yourself add in the preparer’s fee to be sure you still come out ahead.