While at time of publication, summer still has a couple weeks left, so it’s not typically a point where taxes are a hot topic. Yet for 25% of the taxpayers out there, a little bit of paperwork outside of tax season can save them money. There’s no question that taking standard deduction amounts on your return is convenient. It’s a simple calculation and it’s often a larger figure than you’d earn by saving receipts for eligible expenses, which many of us scramble to do at the 11th hour in April. However, if you’re that one person in four, you could put money back in your pocket.
The Standard Practice
The standard deduction amount you can claim depends on your filing status. For 2016 tax returns, these amounts were:
- Single taxpayers — $6,300
- Married taxpayers filing jointly, or widowed — $12,600
- Head of household — $9,300
If you’re over 65, blind, or both, you have additional amounts that you can deduct. The Internal Revenue Service provides tax and standard deduction rates here. These standard deduction amounts give you a ballpark figure to estimate whether itemized deductions will save you money or waste your time.
The Itemized List
Perhaps the first place to look for itemized tax savings is right where you live, if you own a home. If you have a mortgage or home equity loan, it’s worth completing Schedule A to see if itemized deductions exceed standard amounts. Take a look at your Form 1098, provided by your lending institution, often included with your December or January mortgage statement. A quick check is to compare your mortgage interest to your standard deduction. If the interest is close or exceeds this amount, it may be worth checking out IRS publication 936 to see if you can claim this interest.
If you don’t own a home, don’t despair. State, city or county income taxes are deductible from your federal amount — but only if you itemize. The same is true for charitable donations. Qualifying donations to non-profit organizations can be deducted, but only when you itemize these.
Medical expenses are, in theory, deductible, but few taxpayers can claim these, since you can only claim costs that aren’t reimbursed and that exceed 10% of your Adjusted Gross Income. Check IRS publication 502 for more information.
There are many more miscellaneous deductions for which you may qualify. If the expenses above come close or exceed your standard deduction amount, it may well be worth combing through these other deductions to add to your savings, but remember, everything must be documented. If you aren’t storing up tax receipts, there’s no time like now to start.