One common question during tax time: should I itemize my deductions or take the standard deduction? The answer for each taxpayer will depend on the details of his or her tax obligations and potential deductions, but three things that often indicate itemization may save you more money include:
- High income. High earners can benefit from itemization based on simple math. A person in the 33 percent tax bracket can save twice as much as one in the 15 percent tax bracket on the same itemized deduction. A piece in USA Today notes that in many cases, anyone that earns over $80,000 annually could benefit.
- Homeownership. Those who own a home and pay mortgage interest and property taxes may see a lower tax obligation through itemization. Why? Both the mortgage interest payment and property tax payment are generally deductible.
- Medical expenses. A large medical bill can be another sign that itemization is best. Certain medical expenses above a percentage of your adjusted gross income are deductible.
In order to prove beneficial, the itemization total must exceed the standard deduction. In 2017, the standard deduction is set for $6,350 for a single tax filer and $12,700 for joint.
It is important to note that any tax return, whether the deduction is itemized or standard, can result in an audit. The Internal Revenue Service (IRS) can request more information or documentation to support the return.
In many cases, it is wise for to contact legal counsel before continuing the discussion with the IRS. The agency’s claim that you are liable for additional tax obligations may be inaccurate. An attorney experienced in these matters can guide you through the dispute and better ensure your interests are protected.