{"id":27131,"date":"2023-04-18T09:59:49","date_gmt":"2023-04-18T09:59:49","guid":{"rendered":"https:\/\/nxznews.com\/?p=27131"},"modified":"2023-04-18T09:59:50","modified_gmt":"2023-04-18T09:59:50","slug":"should-you-itemize-or-take-the-standard-deduction","status":"publish","type":"post","link":"https:\/\/nxznews.com\/should-you-itemize-or-take-the-standard-deduction\/","title":{"rendered":"Should You Itemize or Take the Standard Deduction?"},"content":{"rendered":"\n

As tax season approaches, many taxpayers find themselves wondering whether they should itemize their deductions or take the standard deduction. The answer to this question is crucial, as it can significantly impact the amount of tax you owe or the refund you receive. In this article, we will demystify the difference between the standard deduction and itemized deductions, offer tips on how to choose the best option for your situation, and even answer the question, “are HELOCs tax deductible<\/strong><\/u><\/a>?” Read on to make an informed decision that could save you money.<\/p>\n\n\n\n

Standard vs Itemized Deductions<\/strong><\/strong><\/h2>\n\n\n\n

The difference between the standard deduction and itemized deductions comes down to simple math. The standard deduction is a fixed amount that lowers your taxable income. For the tax year 2021, the standard deduction was $12,550 for single filers, $25,100 for married couples filing jointly, and $18,800 for heads of households. These amounts are subject to change each year, so be sure to check the current tax year’s numbers. On the other hand, itemized deductions are made up of a list of eligible expenses, which can include mortgage interest, property taxes, charitable contributions, and more. If you have a home equity line of credit (HELOC<\/strong><\/u><\/a>), you might be wondering, “Are HELOCs tax deductible?” The answer is yes, but only the interest paid on the loan used to buy, build, or substantially improve your home is deductible.<\/p>\n\n\n\n

Factors to Consider<\/strong><\/strong><\/h2>\n\n\n\n

To determine which option is best for you, you’ll need to calculate your itemized deductions and compare that amount to the standard deduction. If your itemized deductions are greater than the standard deduction, you’ll likely want to itemize. Conversely, if the standard deduction is higher, you should probably take the standard deduction. To help you decide, let’s walk through some common scenarios.<\/p>\n\n\n\n

    \n
  1. Homeownership:<\/strong>\u00a0Homeowners<\/u><\/a>\u00a0<\/strong>often have several expenses that can be itemized, such as mortgage interest, property taxes, and mortgage insurance premiums. Additionally, if you have a HELOC and the loan proceeds were used for eligible purposes, the interest may be tax deductible, further increasing your itemized deductions. If these expenses combined exceed the standard deduction, itemizing may be the better choice.<\/li>\n\n\n\n
  2. Medical expenses:<\/strong> If you had significant medical expenses during the tax year, you may be able to deduct a portion of those costs. However, only the amount that exceeds 7.5% of your adjusted gross income (AGI) can be deducted. If your medical expenses, along with other itemized deductions, surpass the standard deduction, itemizing could save you money.<\/li>\n\n\n\n
  3. Charitable contributions:<\/strong> Generous taxpayers who make substantial charitable donations may find that itemizing is the better option. The IRS allows you to deduct charitable contributions up to 60% of your AGI, depending on the type of organization you donate to. If your donations, combined with other itemized deductions, are greater than the standard deduction, you should consider itemizing.<\/li>\n\n\n\n
  4. Unreimbursed employee expenses: <\/strong>For certain taxpayers, such as teachers or members of the military, unreimbursed work-related expenses can be deducted. These deductions, along with other itemized deductions, may make itemizing the better option if they total more than the standard deduction.<\/li>\n\n\n\n
  5. State and local taxes: <\/strong>If you live in a state with high income or property taxes, you might find that your state and local tax (SALT) deduction, combined with other itemized deductions, exceeds the standard deduction. However, keep in mind that the SALT deduction is capped at $10,000 ($5,000 for married couples filing separately).<\/li>\n<\/ol>\n\n\n\n

    After weighing your unique financial situation and considering the scenarios outlined above, you should have a better idea of whether itemizing or taking the standard deduction.<\/p>\n","protected":false},"excerpt":{"rendered":"

    As tax season approaches, many taxpayers find themselves wondering whether they should itemize their deductions or take the standard deduction. The answer to this question is crucial, as it can significantly impact the amount of tax you owe or the refund you receive. 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