Tax Tips
When It Pays to Itemize
An expanded standard deduction will save you money, but itemizing could save your even more.
By Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance
February 10, 2010
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The standard deduction on 2009 tax returns is more generous than in the past, but involves more paperwork to claim the additional tax breaks. As long as you have your calculator handy, or you decide to take advantage of the many free or low-cost tax preparation software options, you might as well add up all your costs to see if itemizing trumps an enhanced standard deduction.
In addition to claiming a specific amount for your filing status—$5,700 if single or married filing separately; $8,350 if head of household with dependents; or $11,400 if married filing jointly—you can claim an extra $1,100 deduction for each taxpayer or spouse who is 65 or older or taxpayers of any age who are blind. (A married person filing separately may not claim any standard deduction if his or her spouses itemizes on a separate return, even if the standard deduction would result in a bigger tax savings).
Related Links
- Most-Overlooked Tax Deductions
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Plus, for 2009 returns, non-itemizers can claim enhanced standard deductions for property taxes, casualty losses, and sales taxes paid on the purchase of a new vehicle. To do so, you must file a new Schedule L along with you 1040A short form or 1040 long form. (These enhancements are not available if you file the simplest Form 1040EZ.)
But don’t shortchange yourself. Claim the standard deduction only if it exceeds the amount you could claim by itemizing deductions for mortgage interest and property taxes; charitable donations; casualty losses; miscellaneous expenses; and medical expenses. While 70% of taxpayers claim the standard deduction, millions may be leaving money on the table because they don’t take the time to keep all the receipts and documentation that could add up to a bigger tax break than the standard deduction allows.
Using Schedule L, you can claim the standard deduction plus the actual amount of the real estate taxes you paid on your home in 2009, up to $500 if you are single or head of household or up to $1,000 if you are married filing jointly. Claiming this enhanced standard deduction for property taxes makes sense for homeowners who have paid off their mortgage. But if you haven’t, the combination of your mortgage interest and property taxes alone might be bigger than the standard deduction.
If you bought a new (not used) vehicle last year after February 16, 2009, you can claim the standard deduction plus the actual amount of state or local sales or excise taxes that you paid on the first $49,500 of the purchase price. There is no limit on the number of vehicles that qualify for the deduction, but there is an income eligibility limit to claim it. Individuals with incomes up to $125,000 ($250,000 married filing jointly) can claim the full deduction, phasing out at $135,00 ($260,000 married)
If you suffered a disaster loss in excess of $500 from a federally declared disaster in 2009 (other than a loss in the Midwestern disaster area that has its own set of rules), you can declare the excess loss as an additional standard deduction on Schedule L. But you’ll also have to fill out Form 4684, Casualty and Theft Losses) to figure the net disaster loss amount. If your 2009 adjusted gross income exceeds $166,800 ($83,400 if married filing separately), some of your itemized deductions are disallowed.
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