Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. According to the IRS, money paid for medical care, mortgage interest, taxes, contributions, casualty losses, and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2001, they are:
$7,600 Married Filing Jointly
$6,650 Head of Household
$3,800 Married Filing Separately
The standard deduction amount is more for taxpayers age 65 or older and for those who are blind.
Your itemized deductions may be limited if your adjusted gross income is more than $132,950, or $66,475 for those Married Filing Separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses, gambling losses, and investment interest.
When a married couple files separate returns and one spouse itemizes deductions, the other spouse must also itemize and cannot claim the standard deduction.
There are some taxpayers who are not eligible for the standard deduction. They include nonresident aliens, dual-status aliens, and individuals who file returns for periods of less than 12 months. For additional information, see Publication 501,
"Exemptions, Standard Deduction, and Filing Information."
This daily Tax Tip has been provided by the Internal Revenue Service.