There are two ways an Individual can claim deductions under Internal Revenue Code while filing tax return- either by claiming standard deduction or the intemized deduction. If you can claim standard deduction or itemized deduction , itemized deduction option ( on schedule A of Form 1040 ) will logically be better if it gives you more deduction than the standard deduction .
Major itemized deduction are :
Under itemized deductions, a tax payer can deduct
- his/her medical and dental expenses
- unreimbursed employee business expenses,
- certain payments of taxes,
- contributions to charities ,
- miscellaneous expenses.
- certain casualty and theft losses
As you know the maximum itemized deduction is fixed and also based on your adjusted gross income , itemized deduction may be reduced or phased out if the adjusted gross income is more than the following threshold ( For tax year 2016 )
- Single – $259,400
- Married filing jointly or qualifying widow(er) – $311,300
- Married filing separately – $155,650
- Head of household – $285,350
But there are cases, when the option for standard deductions are not available !
When claiming itemized deduction is the only option ?
In following situation , you can not opt for standard deduction even if you wish. So only option as far as claiming deduction is concerned is the itemized deductions. These situations are :
- You are a married individual , filing as married filing separately and your spouse itemizes deductions.
- you file tax return for a period of less than 12 months because of a change in your annual accounting period.
- You are a nonresident alien or a dual-status alien during the year not married to a us citizen.
- An estate or trust, common trust fund, or partnership;
When opting itemized deduction may be better ?
Apart from the two reason , itemized deduction is more or you are not able to claim standard deduction , it is better to choose itemized deduction in following situations :
- You had large uninsured medical and dental expenses
- You paid interest or taxes on your home
- You had large unreimbursed employee business expenses or other miscellaneous deductions
- You had large uninsured casualty or theft losses, or
- You contributed to qualified charities