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End of the Year Tips: Itemize vs Standard Deduction

You are no doubt used to taking either the standard deduction or itemized deduction when you file taxes. If there was no major change in your financial situation in 2015, you may not need to change filing tactics. However, you may want to review your options if a change affected your finances, such as marriage, the birth of a child, promotion, change of job, a child who can no longer be claimed as a dependent, receipt of extra income, and so on. Estimating your tax liability using both the methods can help you to choose the method that provides more financial advantages.

How to Itemize

You may first itemize your deductions to see how much in taxes you need to pay. For that, you may add all the deductible expenses you incurred during 2015. Expenses that can be deducted include:

  • Gifts to charities
  • Home mortgage interest
  • State and local income taxes or sales taxes (one of the two, not both)
  • Casualty or theft losses
  • Certain medical expenses
  • Certain employee business expenses

You may use the IRS Free File to help you determine if you should itemize. If you itemize, use Form 1040 and Schedule A, Itemized Deductions. IRS Free File also allows you to choose the correct tax forms you need to file if itemizing.

How to Use the Standard Deduction

After determining your tax liability by reviewing your deductions, you can see which of the two methods will help you save more in taxes. Before considering the standard deduction, verify that you are eligible to take it.

Your standard deduction for 2015 depends upon your filing status. The standard deduction for 2015 is as follows:

Single – $6,300

Married filing jointly – $12,600

Married filing separately – $6,300

Head of household – $9,250

Surviving spouse – $12,600

If you are having trouble determining your standard deduction, you may use the IRS’ Interactive Tax Assistant Tool. You will need to fill in your age, your spouse’s age, filing status, and basic income information including amounts and adjusted gross income. If you use the standard deduction, you may use Form 1040, 1040A, or 1040EZ.