U.S. taxpayers are able to claim either a standard deduction or itemized deductions on their annual tax returns.  Tax deductions are allowed for many expenses, ranging from medical costs to charitable contributions and home office expenses.

But before you start collecting receipts and calculating costs, it is important to understand the difference between standard deductions and itemized deductions.

Standard Deductions

The standard deduction amount is calculated by the IRS annually and varies based on your age and filing status.  Using the standard deduction is beneficial if the itemized deductions you can claim add up to less than the standard deduction amount.

For 2015 taxes, the standard deductions that will apply to most people are:

• Single or Married Filing Separately: $6,300
• Married Filing Jointly: $12,600
• Head of Household: $9,250

Itemized Deductions

If you itemize your deductions, you will need to file Schedule A along with your Form 1040 to calculate allowable deductions.

Major deductions that can be itemized include:

• Unreimbursed medical expenses
• Real estate/personal property taxes
• Charitable gifts
• Losses due to casualty or theft
• Unreimbursed business expenses (for employees)
• Mortgage interest
• State and local income OR sales tax

There are also many other miscellaneous items that can be deducted on your tax returns.

Still not sure whether to use standard or itemized deductions?  A good rule of thumb is to estimate your costs for the major deductions bulleted above.

• If your total estimates do not come close to the standard deduction amount for which you are eligible, then the standard deduction is probably your best bet.
• If your estimated total for the major itemized deductions is near the standard deduction amount, it is likely worth your time to add up all of your costs to see if you can claim a bigger deduction by using itemized expenses on your ta return.

You can also give Simplitax a call!  We will take the guesswork tax deductions and simplify your tax return process.

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