Taxes 101 – Should You Itemize Your Deductions

AdminBy AdminNov 4, 20170

When you file your taxes, you have a choice when it comes to taking your deductions. You can simply use the standard deduction provided by the IRS, or you can use Schedule A to itemize each of the allowable deductions. Knowing which option to use can be confusing, especially if your tax situation is complex.

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When it comes time to decide whether or not to itemize your deductions, it pays to know which items are and are not deductible. Knowing what you can deduct is one of the best ways to determine whether or not itemizing will save you money.

One of the major items you can deduct when you itemize your taxes is the interest on your home mortgage. If you have a mortgage on your home, chances are itemizing your deductions can save you a lot of money, since you cannot deduct your interest if you take the standard deduction.

Giving to charity can also save you money on your taxes, but only if you itemize your deductions. If you gave a substantial amount of money to charity in the past year, or if you plan to make a sizable contribution before filing your taxes, you may find that itemizing can save you a lot of money.

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You can also deduct the cost of other taxes you pay when you itemize your deductions, but not when you take the standard deduction provided by the IRS. If you live in a state with a high income tax or sales tax rate, you may be able to save a lot of money when you itemize. Itemizing your deductions can also make sense if you pay a lot of property and real estate taxes, since those taxes are deductible on Schedule A as well.

No matter how many deductions you have, you should never simply assume that itemizing will save you money. Instead, you should run the numbers both ways, with the standard deduction and your itemized deductions. Until you actually plug in the numbers and compare, you cannot truly know if itemizing your deductions will indeed save you money.

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