Itemize or Choose the Standard Deduction

Most taxpayers claim the standard deduction when they file their federal tax return. However, some filers may be able to lower their tax bill by itemizing. Find out which way saves the most money by figuring taxes both ways.

Figure Your Itemized Deductions.  Taxpayers need to add up deductible expenses they paid during the year. These may include expenses such as:

• Home mortgage interest
• State and local income taxes or sales taxes (but not both)
• Real estate and personal property taxes
• Gifts to charities
• Casualty or theft losses
• Unreimbursed medical expenses
• Unreimbursed employee business expenses

Special rules and limits apply. 

Know The Standard Deduction. If a taxpayer doesn’t itemize, then the basic standard deduction for 2016 depends on their filing status. If the taxpayer is:

• Single - $6,300
• Married Filing Jointly - $12,600
• Head of Household - $9,300
• Married Filing Separately - $6,300
• Qualifying Widow(er) - $12,600

If a taxpayer is 65 or older, or blind, the standard deduction is higher than the previous amounts. The deduction may be limited if the taxpayer can be claimed as a dependent.

Check the Exceptions. There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if the taxpayer is married filing a separate return and their spouse itemizes. In this case, the taxpayer’s standard deduction is zero and they should itemize any deductions. 


All taxpayers should keep a copy of their tax return.  Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity.



Source: Internal Revenue Service

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(858)247-1680

2017 Standard Mileage Rates for Business, Medical and Moving

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 53.5 cents per mile for business miles driven, down from 54 cents for 2016
• 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
• 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.   The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.




Source: Internal Revenue Service

contact@officetaxservices.com

(858)247-1680

If you claim standard deduction...

If you claim standard deduction, you cannot itemized deductions. 

The standard and itemized deduction is a dollar amount that reduces your taxable income, but you cannot claim both. You should claim whichever one is higher. 

Certain taxpayers cannot use the standard deduction:

• A married individual filing as married filing separately whose spouse itemizes deductions.
• An individual who files a tax return for a period of less than 12 months because of a change in his or her annual accounting period.
• An individual who was a nonresident alien or a dual-status alien during the year. Nonresident aliens who are married to a U.S. citizen or resident alien at the end of the year and who choose to be treated as U.S. residents for tax purposes can take the standard deduction. 
• An estate or trust, common trust fund, or partnership; 

Itemized deductions include amounts you paid for state and local income or sales taxes, real estate taxes, personal property taxes, mortgage interest, and disaster losses. You may also include gifts to charity and part of the amount you paid for medical and dental expenses. You would usually benefit by itemizing on Form 1040, Schedule A, if you:

• Cannot use the standard deduction
• Had large uninsured medical and dental expenses
• Paid interest or taxes on your home
• Had large unreimbursed employee business expenses
• Had large uninsured casualty or theft losses, or
• Made large charitable contributions

Your itemized deductions may be limited and your total itemized deductions may be phased out (reduced) if your adjusted gross income for 2015 exceeds the following threshold amounts for your filing status.

If you have any questions, send us a message or leave a comment. We will be more than happy to help you.

 

contact@officetaxservices.com

(858)247-1680