Deduction vs. Itemizing:
7 Facts to
Help You Choose
year, millions of taxpayers choose whether to take the
standard deduction or to itemize their deductions.
The following seven facts from the IRS can help you choose the
method that gives you the lowest tax.
1. Qualifying expenses - Whether to itemize deductions
on your tax return depends on how much you spent on certain
expenses last year.
If the total amount you spent on qualifying medical care,
mortgage interest, taxes, charitable contributions, casualty
losses and miscellaneous deductions is more than your standard
deduction, you can usually benefit by itemizing.
2. Standard deduction amounts -Your standard deduction
is based on your filing status and is subject to inflation
adjustments each year.
For 2011, the amounts are:
Married Filing Jointly-$11,600
Head of Household-$8,500
Married Filing Separately-$5,800
3. 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 another
taxpayer can claim an exemption for you. If any of these
apply, use the Standard Deduction Worksheet on the back of
Form 1040EZ, or in the 1040A or 1040 instructions.
4. Limited itemized deductions - Your itemized
deductions are no longer limited because of your adjusted
5. Married filing separately - When a married couple
files separate returns and one spouse itemizes deductions, the
other spouse cannot claim the standard deduction and therefore
must itemize to claim their allowable deductions.
6. 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.
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7. Forms to use - The
standard deduction can be taken on Forms 1040, 1040A or
1040EZ. To itemize your deductions, use Form 1040, U.S.
Individual Income Tax Return, and Schedule A, Itemized
These forms and instructions may be downloaded from the IRS
website at www.irs.gov or ordered by calling 800-TAX-FORM
(800-829-3676). ( taken from IRS Tax Tip 2012-43
click here to listen to this video update on:
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read an article in SmartMoney magazine recently that
I wanted to pass along to you titled:
5 Little-Known Tax Deductions by Bill Bischoff
where he talks about it being possible to write off
some expenses that were paid for by someone else
1. Medicare Insurance and Long-Term Care
2. Medical Expenses Paid by Someone Else
3. Real Estate Taxes Paid by Someone Else
4. Home Mortgage Points Paid by Someone Else
5. Fees to Charge Taxes to Your Credit Card
Click here to read the article online.
Traditional IRA or Roth IRA before April 17
Remember you have until you file your tax return to make a
contribution to a Traditional IRA or Roth IRA for the 2011 tax
year. The annual contribution amount is $5,000 or $6,000 (if
you are age 50 or over). Prior to making the contribution you
will want to make sure your modified adjusted gross income
(MAGI) does not exceed the income thresholds. The 2011 limits
How does the phase-out work?
If your income is below the "full contribution" amount noted
above, you can contribute up to the maximum annual
contribution. But what if your income falls between these
ranges? Then how much can you contribute?
1. Subtract your income from the higher (phase-out complete)
amount to get your contribution income potential.
2. Next calculate the phase out range.
3. Divide your contribution income potential by the phase-out
4. Take the result times your maximum annual contribution
Example: Roth IRA contribution limit for a single person, age
40 with MAGI of $112,000; $10,000 contribution income
potential (122,000-112,000); divided by phase-out range of
$15,000 ($122,000 – 107,000); 10,000/15,000= .666 x $5,000 =
$3,300 2011 ROTH IRA contribution limit. Rounding rules apply.
If it's too late for you to make a 2011 contribution, it’s not
too late to plan for 2012. Here are the limits for 2012.
A final thought: If your income is too high to take advantage
of these IRAs you can always make a non-deductible
contribution to an IRA. While the contributions are not
tax-deferred, the earnings are not taxed until they are
here to see this article as a web page)
To read this & my other articles online go to
www.MonicaRebellaCPA.com and click on the Newsletter section.
always you can call me at 714-619-0667 if you have any
questions about investing, retirement or any other tax &
accounting related issues.
Regards, Monica Rebella, CPA/IAR
President, Rebella Accountancy