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Why Itemizing Deductions Will Not Always Get You a Higher Tax Refund

Why Itemizing Deductions Will Not Always Get You a Higher Tax Refund

Taxpayers who itemized their deductions saved over $1 trillion last year. However, not everyone who did this saved money. In fact, sometimes taking the standard deduction will get you the most money on your federal refund status.

Should I Itemize or Take the Standard Deduction?
Figuring out if you should choose the standard or itemized deduction is simple. If your standard is higher, choose that one! Getting the higher amount of money on your refund status is the goal. There’s no penalty for itemizing and then choosing to not go this route.

You should at least attempt to itemize, though. Many people simply ignore this to save time or use the 1040-EZ form. You’ll never know until you try, and it could result in a higher federal refund status.

There are many things you can include on the form to get a lower tax liability. They include medical payments, theft and child care. Also, any job expenses you were not paid back for can be itemized for a better federal refund status, too. You can even enter in items not specifically found on your tax return form. However, make sure you have proof and can explain why you are deducting them.

When Standard Is Lower
However, only one in four people will achieve a better refund status from itemizing. The rest of us should choose the standard option for a higher refund status. There are several reasons why this is.

First, the term ‘standard’ is a bit of a misnomer. If you add up all your deductions, it still might not be equal to or over the amount the IRS can automatically give you. Choose the standard if it benefits you. This can lead to a higher refund status.

Some people have problems when reporting medical bills. Not all hospital bills are available when itemizing for a better refund status. They can only be included if they are over 7.5% of your income. For most people, this is only if there is a major illness.

Wanting to put in all the money you gave to charity? Do you have receipts for them? If not, they can’t be included for a better federal refund status. The IRS is very particular about charity deductions, so be careful. Gas money can be entered, but you must have receipts for this as well.

Also, your real estate and mortgage expenses might not make a big of a dent as you think in your federal refund status. Your real estate taxes are in the standard anyway. Also, the part of your mortgage you can deduct may be shrinking. Have you refinanced to get a lower interest rate? Your potential deduction shrank. The more you pay your mortgage, the less you owe and the less can be deducted for a better federal refund status.

Still, we suggest trying to itemize before you choose standard. Choose whichever deduction turns out to be higher for a better refund status.

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