Should you itemize deductions?

Understanding itemizing versus standard deductions is very important because it determines whether individual deductible expenses will actually affect your total taxes.

For example, if you itemize, then another charitable expense will increase your deductions, and lower your taxes.  On the other hand, if you are unable to itemize, then additional charitable expenses will have no effect on your taxes.

US taxpayers must choose between what is called the “standard deduction” and “itemized deductions.”  To do this, first add up all of your itemized deductions, using Schedule A.  This will include items like:

• medical and dental expenses
• state and local income and property taxes
• mortgage interest and points
• employee work expenses
• charitable donations.

If your total itemized deductions exceed the standard deduction, then itemize.  If they are less than the standard deduction, then stick with the standard deduction.

Usually taxpayers who own their own homes are able to benefit from itemizing deductions.  But other factors may cause you to itemize: living in a high-tax state, catastrophic medical or dental expenses, large uninsured theft losses, or large charitable contributions.  Now certain taxpayers are not allowed to itemize, such as

As always, there are thousands of pages of fine print here.  I’m giving you the basic rules.  Before you actually try this with your own real money, either speak to your accountant or study the rules.