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Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. If you have a choice, you can use the method that gives you the lowest tax.
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2009, they are:
- $5,700 for Single
- $11,400 for Married Filing Jointly
- $8,350 for Head of Household
- $5,700 for Married Filing Separately
- $11,400 for Qualifying Widow(er)
Some taxpayers have different standard deductions The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether an exemption can be claimed for you by another taxpayer. If any of these apply, you must use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions. The standard deduction amount also depends on whether you plan to claim the additional standard deduction for state and local real estate taxes or state or local excise tax on a new vehicle, and whether you have a net disaster loss from a federally declared disaster. You must file Schedule L, Standard Deduction for Certain Filers to claim these additional amounts.
Limited itemized deductions Your itemized deductions may be limited if your adjusted gross income is more than $166,800 or $83,400 if you are married filing separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses of personal use and income producing property, gambling losses and investment interest expenses.
Married Filing Separately When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and should itemize their deductions.
Some taxpayers are not eligible for the standard deduction They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.
Forms to use The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. If you qualify for the higher standard deduction for real estate taxes, new motor vehicle taxes, or a net disaster loss, you must attach Schedule L. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.
These forms and instructions may be downloaded from the IRS.gov Web site or ordered by calling 800-TAX-FORM (800-829-3676).
The IRS wants taxpayers who pay state or local real estate taxes but don’t qualify to itemize their tax deductions, to know that they may qualify for an increased standard deduction. This is the last year that the higher standard deduction for real estate taxes is available.
Here are six things you need to know about the higher standard deduction for real estate taxes:
- The additional deduction amount is equal to the amount of real estate taxes paid, or $500 for single filers or $1,000 for joint filers, whichever is less.
- The taxes must be imposed on you.
- You must have paid the taxes during your tax year.
- The taxes must be levied for general public welfare on the assessed value of the real property and charged uniformly on all property under the jurisdiction of the taxing authority. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks and sewer lines. These taxes usually cannot be deducted.
- Real estate taxes paid on foreign or business property do not qualify for the increased standard deduction.
- You must file a Form 1040 or 1040A and attach Schedule L, Standard Deduction for Certain Filers, to claim the increased deduction. When claiming the higher standard deduction for real estate taxes, be sure to check the box on line 40b of Form 1040 or line 24b of Form 1040A.
For more information, see Form 1040 or 1040A Instructions and Schedule L instructions. The forms and instructions can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).