Money Monday: Understanding Tax Deductions

Standard vs. Itemized Deductions

npr.org

npr.org

When I filed my taxes I used the standard deduction for a single taxpayer. However, my sister did itemized deductions for her taxes. It's more beneficial for her because she owns a home, has work related expenses, and medical bills she can itemize individually and get her taxable income reduced more than if she were to use the standard deduction. 

If you're still lost, here is the basic run down of both deductions:  

Standard Deduction

The standard deduction is a fixed dollar amount that reduces the income you’re taxed on. The deduction amount varies according to your filing status. Here are the standard deductions for 2013:

  • For single taxpayers - $6,100
  • For married taxpayers filing a joint return or qualifying widow(er) - $12,200
  • For head of household taxpayers - $8,950

Itemized Deduction

investopia.com

investopia.com

The itemized deduction also reduces your taxable income, but does so by each taxable item you qualify for. To itemize your deductions, you would need to have kept your receipts for 2013 for any medical bills, charitable donations, etc. 

According to H&R Block you might benefit from itemizing your deductions if you:

  • Have itemized deductions that total more than the standard deduction you’d receive
  • Had large, uninsured medical and dental expenses
  • Paid mortgage interest and real estate taxes on your home
  • Had large, unreimbursed expenses as an employee
  • Had a large, uninsured casualty (fire, flood, wind) or theft losses
  • Made large contributions to qualified charities
  • Had large, unreimbursed miscellaneous expenses

When I filed my taxes through Turbo Tax, they lead me through a bunch of questions to determine if standard or itemized would be best for me. This might seem like a bunch of mumbo-jumbo, but it really wasn't that bad! All in all, filing my taxes was pretty painless.

If you have any questions about your taxes, please don't hesitate to leave a comment in the section below, contact me on Facebook, Twitter, or email me at youngfreemaine@gmail.com

Hope this helps!

Lauren R.