Know Whether to Take the Standard Deduction or Itemize Before You File
Just a tip:
Each taxpayer chooses each year by determining the standard deduction, the fixed IRS amount, and actual expenses such as mortgage interest, state taxes, and charitable contributions. Explain if your deductible expenses exceed the standard deduction. Most people just go with the standard amount, but homeowners with high mortgage interest often skimp on the details, so run both calculations.
Most filers never do. Tax software sets the standard deduction by default, and unless you include your deductible expenses, it has nothing to compare it to. People who would be outnumbered take a smaller amount without ever knowing.
The comparison takes less effort than it seems. Itemized deductions fall into four main buckets: mortgage interest, state and local taxes up to a federal limit, charitable donations, and medical bills above a certain amount of your income. Add them. If it all exceeds the standard deduction for your filing status, it wins the match.
Since the standard deduction nearly doubled in 2018, about 9 in 10 filers take it, according to IRS data. That still leaves millions who save individually, and they fall into predictable groups: homeowners in the early years of a mortgage, when payments are mostly interest, and filers in high-tax states that quickly rack up property and income taxes.
Before you file, gather three records: your Form 1098 showing mortgage interest paid, your property tax bill, and receipts for each donation. Enter all of this into your tax software even if you expect to take a standard amount. The software compares the two totals and applies the higher one automatically, but it can only compare the numbers you provide. If you use a preparer, deliver the same documents and ask to see both estimates.
If your item totals fall short, look at them in batches. Concentrating charitable donations on a single biennium can result in overspending that year.
The math takes ten minutes when you have the documents in hand. Make it the first step in your filing routine, not an afterthought.
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