For years, my husband and I just took the standard tax deduction, and were happy with it. After all, that deduction is fairly hefty. Then, my home business started making money (and our contributions to our church rose correspondingly), and we bought a home.
Now, suddenly, we had a higher amount that we could deduct — and it was more than the standard deduction. We started itemizing our tax deductions.
Do Your Deductions Amount to More than the Standard Deduction?
It may seem like a pain to add up all of your deductions, but it can pay off in the end. If your itemized deductions add up to more than the standard deduction, your taxable income will be lowered by that much more. Some of deductions that you can itemize to help you reduce your income by a little bit more include:
- Uninsured medical and dental expenses: If you paid out of pocket for medical and dental expenses, these can be deducted. Your expenses must exceed 7.5% of your Adjusted Gross Income, though, if you want to deduct them. For some, though, who have high deductibles, and for those who don’t have dental insurance and had major work done, this can be a real help in offsetting some of the costs.
- Interest and taxes on your home: The mortgage interest that you pay is tax deductible. Additionally, your property taxes are deductible. Unfortunately, as 2011 expires, so, too, does the tax deduction for PMI premiums paid. But, you can still get a fairly hefty deduction for interest and taxes on your home.
- Unreimbursed employee business expenses: If you spent a great deal out of pocket on behalf of your employer, for business-related items, and you were not reimbursed, you can receive a tax deduction for that. Make sure that you keep good records of the expenses incurred, including receipts.
- Miscellaneous deductions: In some cases, you might have large, unreimbursed expenses that don’t readily fall into any category. With proper documentation, you can deduct these as well, but you might want to consult a tax professional before you do.
- Uninsured losses due to theft or casualty: If your home was hit by a disaster, or if you have had a theft, you might be able to itemize those deductions. First of all, any theft or casualty tax deduction has to be on expenses that were not covered by your insurance company. If you insurance company paid for repairs, you can’t deduct that amount. You can only deduct the amount using a formula provided by the IRS on losses not taken care of by insurance.
- Charity donations: Large charity donations to qualified non-profits can be deducted as well. If you make large enough donations, it can overwhelm your standard deduction.
There are other eligible tax deductions as well. You don’t need only one of the above to exceed your standard deduction in order to benefit from itemizing. You can add up as many items as necessary to get your total. It’s this total that matters when determining whether or not you have more than the standard deduction. And, if it looks like you will have a larger number than the standard, it’s a good idea to itemize in order to increase your tax efficiency.
Latest posts by Miranda Marquit (see all)
- Watch Out for Interest-Only Home Loans - July 9, 2014
- How To Stop Feeling Pessimistic About Retirement - July 7, 2014
- 3 Tips for Keeping Your Summer Budget Under Control - June 10, 2014