Itemized Deductions vs. Standard Deduction
How do I decide which tax form to file? Whichever one leaves me with the most money in my pocket, obviously.
But how do I decide which tax form will give me the most money? Apparently, it all comes down to deductions. As a young married couple of two, do we file the standard deduction of $11,600 for a married couple filing jointly? Or do we itemize our deductions?
The standard deduction is the easiest choice. The idea of itemizing our deductions seems time consuming and I am not even sure that our itemized list would be more than the standard deduction. In fact, it may even be less.
So what would qualify under itemized deductions?
The list of itemized deductions includes:
- Medical expenses
- State income taxes
- Property Taxes
- Home Mortgage interest
- Charitable contributions
- Casualty and theft losses
- Job Expenses
- Misc deductions
My husband and I don’t qualify for Property Taxes, Mortgage interest or casualty and theft losses, leaving us with:
Medical Expenses
We put $700 into our Flexible Health Spending Account (FSA), which is tax-deductible. But that’s about it. This year (2012), I contributed $5,000 toward our FSA account so I could get Lasik Eye Surgery. I’m excited about the surgery, but not happy that it’s taking away almost $500 a month (including health insurance) from my take-home pay.
State Income Taxes
According to my last paycheck, I have contributed over $2,200 in state income taxes. I don’t have any of my husband’s pay stubs so I don’t know how much we could add from him. Considering he didn’t work for five out of the 12 months, I don’t think it would be very much.
Charitable Contributions
Our charitable contributions are pitiful. At one point, we were making a monthly contribution to our church, but that went down the wayside when Eric stopped working. I really hope to pick this up again this year.
Job Expenses
This is a toughie. There are a lot of requirements for this one, including job search expenses. Eric’s academy would count, including all his travel arrangements to Seattle, Arizona, Nevada, and northern California for job tests and interviews for fire departments. Between Eric’s travel and school, we spent about $5,500 but I don’t have exact numbers unless we pull out all the receipts. And to be fair, I’m not sure we even have all the receipts.
So right now, with itemized deductions, we’re looking at$8,400 vs. the $11,600 standard deduction.
Then you also have to look at the cost of filing the long tax form (itemized deductions) vs. the short tax form (standard deduction only). It costs an extra few hundred dollars to fill out the longer tax form, so you want to make sure the overall worth of your itemized deductions will cover the extra expense.
I know very, very little about taxes and everything I know is from what the internet has taught me.
How do you decide which tax form to file? Do you itemize deductions or take the standard deduction?
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I have both mortgage interest and property taxes which take my Schedule a deductions well above the standard deduction for a single guy with no dependents, so it's a no-brainer for me. If I needed to fudge any numbers in order to qualify for itemization, I would still opt for the standard deduction, as the extra little bit coming back wouldn't be worth the hassles of being questioned on it should it happen (plus having to pay back the tax on any disallowed deductions along with any interest and penalties for false reporting). It's pretty cut and dry, really you either qualify or you don't based on the numbers you have.
I'm curious about your FSA plan. Is it an employer-sponsored plan that comes out of your paycheck pre-tax? If it is, you need to be careful not to take any of those contributions or expenses on your tax return, since it was already exempted from your taxable income from the beginning and doing so would be double-dipping.
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