Tax Tip: Should You Itemize?
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. 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, according to the IRS.
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2000, they are:
- Single - $4,400
- Married filing joint - $7,350
- Head of Household - $6,450
- Married filing separate - $3,675
The standard deduction amount is higher 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 $128,950, or $64,475 if 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 to use 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 IRS Publication 501, "Exemptions, Standard Deduction, and Filing Information."
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This daily Tax Tip has been provided by the IRS