Everyone gets at least a couple of deductions on their federal tax return. One you can always count on is the standard deduction. Remember, deductions are things that reduce your taxable income…the more you have, the less of your income will be taxed. So, with the IRS giving everyone a freebie is like the IRS saying
everyone can have a little bit of income tax free
Granted, this so-called automatic deduction isn’t going to change your life but it is quite a chunk of tax-free income. Here’s what it means for your actual tax return. For tax year 2012 the standard deduction for a single person was $5950. Let’s say that person’s income put him or her in the 15% tax bracket. That means he or she saves 15% of 5950 or $892.50. Nice,eh?
The amount of your standard deduction varies depending on your filing status.
- $8700 for head of household status
- $5950 for single taxpayers (also for married filing separately)
- $11900 for married filing jointly
The standard deduction changes every year- luckily it goes up, not down! It goes up a little bit each year, to adjust for inflation. For example, the amount for single taxpayers went up by $150 from 2011 to 2012. The married filing jointly standard deduction is simply double the single amount: $11,900.
How to Get More Than the Standard Deduction
Some people get even more than the standard deduction. They have lots of certain types of expenses and the total of those certain expenses equals more than the standard deduction amount. One big question filers have each year is whether to just go with the standard deduction or add up these special expenses and see if they total more than the standard amount.
This is called itemizing your deductions. The tricky part is knowing what expenses qualify to be used as deductions on your tax return. One of the biggest ones is medical expenses.
If your medical bills are high, itemizing your deductions may be worth it for you. It’s simple: if your medical expenses total more than $5950 (if you’re filing as a single taxpayer) go for it and itemize to save money on your taxes. We’ll cover what types of medical expenses qualify in another post.
Here are some other types of expenses that qualify to be itemized on your federal tax return:
- medical expenses
- taxes you paid
- donations to qualified charities
- money lost on gambling
The list goes on, but you have the general idea. We’ll tell you about all the deductions that can be claimed on your federal taxes. You should always claim every deduction you are entitled to, and have documentation to back up your expenses (i.e. receipts for those expenses).
Some More Notes on Itemized Deductions
If you are subject to the Alternative Minimum Tax (AMT) you cannot use the standard deduction. Some of these itemized deductions can be used,however, if you get caught in the AMT web. More on that in another post.
If you are part of a married couple filing separate tax returns, then either both must itemize or neither one can itemize.