When Should You Use Itemized Deductions?

By: TSPadmin

As a general rule, you would be better off using itemized deductions if your allowable itemized deductions are greater than your standard deduction. On the other hand, if in the first place you do not qualify for the standard deduction, then your only real option is to make the itemization required under Schedula A of Form 1040.

Additionally, your itemized deductions may be limited and your total itemized deductions may be phased out or reduced if your adjusted gross income (AGI) for 2015 exceeds the following threshold amounts for your filing status: $258,250 for single; $309,900 for married filing jointly or qualifying widow(er); $154,950 for married filing separately; and $284,050 for head of household. If your AGI is above the “applicable amount” or threshold, then the total allowable itemized deductions is reduced by 3% of the excess of AGI over the “applicable amount” or by 80% of the total itemized deductions, whichever is lower.

When you itemize, you can deduct part of your medical and dental expenses, unreimbursed employee business expenses, the amounts you paid for certain taxes, interet, contributions, and miscellaneous expenses, and also certain casualty and theft losses. Generally, you would benefit from using the Schedule A itemization of allowable deductions more than you would if you use the standard deduction if you had large uninsured medical and dental expenses, paid interest or taxes on your home,  had large unreimbursed employee business expenses, had large uninsured casualty or theft losses, or made large charitable contributions in 2015.

In addition to the allowable deductions, you may also be eligible for certain tax credits. For instance, you may be able to claim the “child and dependent care credit” if you paid expenses for the care of a “qualifying individual” which may be a child under 13 years of age or a spouse who is physically or mentally incapable of self-care. The amount of the child and dependent care credit is a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual. The total expenses to use in calculating the credit may not be more than $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals.

If you are making contributions to certain eligible retirement plans or to an individual retirement arrangement (IRA), you may also be able to take a “retirement savings “tax credit. The amount of the saver’s credit you can get is generally based on the contributions you make and your credit rate. If you are eligible for the credit, your credit rate can be as low as 10% or as high as 50%, depending on your AGI. The lower your income, the higher the credit rate. You are not eligible for the credit if your AGI exceeds a certain amount.

If you worked last year but did not earn a lot of money, it’s also possible that you could qualify for the earned income tax credit (EITC), a refundable tax credit entitling you to a tax refund even if you did not have federal income tax withheld.

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