Federal income taxes can swallow up a big portion of your income. Getting the most deductions possible is the only way to legally reduce the amount of tax you pay. To get all the deductions you can, you'll need to itemize your tax deductions. It's more complicated than taking the standard deduction, but the savings can be worth it.
Collect all of your forms, receipts and records for the tax year. Some deductions, such as mortgage interest, are reported to both you and the Internal Revenue Service (IRS) on official tax forms. Other deductions require the taxpayer to have receipts or other documentation to claim them such as charitable contributions and medical expenses.
Obtain an IRS Form 1040, Schedule A, which is used to itemize tax deductions, along with the instructions for Schedule A. Completing Schedule A is made simpler by using computer software.
Proceed through the instructions for Schedule A. Enter each value by adding up all of the eligible expenses for each line and entering the total in the box provided, or by using the provided worksheets to calculate the appropriate values. If using computer software, follow the screens the program presents and enter the details it asks for. This produces the same result—a completed Schedule A—but ensures that the math is correct.
Finish Schedule A and compare the total value of your itemized deductions to the value of the standard deduction. Make sure the itemized value is higher than the standard value. If not, you will pay less tax by using the standard deduction.
Keep all of your receipts and worksheets for at least five years. Although most documented proof of tax deductions is not submitted to the IRS when the taxes are filed, taxpayers are required to keep such proof for a minimum of five years in case the IRS asks to see it.
The standard deduction allowed by the IRS increases each year.
This article provides general information only and is not intended to provide specific tax advice. Always consult a tax professional for any specific questions regarding your tax situation.
- The standard deduction allowed by the IRS increases each year.
- This article provides general information only and is not intended to provide specific tax advice. Always consult a tax professional for any specific questions regarding your tax situation.