Standard vs. Itemized Deductions

Some people think there is an advantage to itemizing their deductions on their tax return. What some people call filing the long form. The problem is the media likes to throw out little sound bites, around tax time, saying "you may be able to pay less taxes if you itemize."

While this is true for some, it is not true for all people. In fact most people who use the standard deduction are actually getting a tax break.

The tax code allows you to subrtact certain items from your income before you calculate your taxes. These include mortgage interest, some taxes that you paid, some medical expenses, some casualty losses and a few other miscellaneous items. Or you can take a standard deduction based on your marital / filing status.

Let's say you are married and filing a joint return and your total itemized deductions are $6,000. ($3,000 of Mortgage interest, $1,000 of property taxes, $1,500 of state income tax and $500 of charitable contributions).

The standard deduction for a married couple filing a joint return in 2005 is $10,000.

If you were forced to use your itemized deductions and your taxable income was $14,000, you would pay an additional $400 in taxes. If your taxable income was $59,000 you would pay an additional $600 in taxes. If your taxable income was $119,000 you would pay an additional $1,000 in taxes.

To itemize on your tax return you have to have spent money on specific deductible items. If you can't itemize. it means you have not spent the money necessary to reach the limit and have actually gotten a larger deduction than if you had to use itemized deductions.

On the other side. If you spent your money on these items, you would be foolish not to claim them on your tax return as itemized deductions and benefit by paying less tax.

For more information, refer to Form 1040 Instructions, or Publication 17.