Should I Itemize?
Although itemizing takes more work than using the standard deduction, it makes sense in many cases. In some cases, you may not have a choice. This blog will help you understand when you do not have a choice and when itemizing is better if you have a choice.
When Itemizing Is Necessary?
Some people are required to use itemized deductions. If you and your spouse are filing separately, itemizing is necessary if your spouse also itemizes deductions. You can use the standard option if your spouse also does. This can be frustrating and difficult when it is necessary or better for one spouse to itemize and better for the other to use the standard deduction.
Itemizing is necessary if you were a dual-status alien or nonresident alien for the tax year. There is an exception if you marry someone who is a resident alien or citizen by the end of the tax year. In that case, you can choose to be treated as a U.S. citizen in terms of tax rules.
When Itemizing Is Better?
If the points in the previous section do not apply, itemizing deductions is optional. For many people with simpler tax returns, it is better to take the standard rate of deduction. An easy way to determine the ideal choice is to find out if your itemized deductions are larger than the standard option. If they are, itemizing is more favorable for you.
There are several situations that may increase the benefits of itemizing. For example, if you paid large sums for medical or dental care without insurance, those expenses may be more than the standard deduction. Another example is if you paid large real property taxes or mortgage interest on your home for the tax year.
If you had a sizable loss from a disaster, an uninsured casualty or a theft incident, itemizing is often better. You may also benefit from itemizing deductions if you made sizable charitable contributions or had other large itemized deductions. Other deductions are listed on line 16 of Form 1040’s Schedule A.
How an Accountant Helps with Itemizing
Deciding to itemize can be confusing if you are unsure about how to calculate deductions or fill out the Schedule A form. There may be other forms for additional tax preparation needs that you have due to unusual circumstances. An accountant can review your documents and help you maximize tax deductions and tax credits.