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So, you're figuring out how to calculate income tax and you're stumped. Federal income tax law has you confused and your IRS income tax returns are getting delayed in the process. The big question on your mind is to itemize or not to itemize?
Let's step back for a second and actually identify the tax jargon involved. The standard deduction amount is a predetermined amount that the IRS lets you take. They decide what the standard deduction amount is and at which income levels it phases out.
So here's what you need to know in deciding whether to take the standard deduction or whether to itemize:
Know what your standard deduction amount is. For tax year 2009, the amounts are:
$5,700 for Single
$11,400 for Married Filing Jointly
$8,350 for Head of Household
$5,700 for Married Filing Separately
$11,400 for Qualifying Widow(er)
There are also additional standard deductions for real estate tax paid, sales or excise tax paid on a new vehicle purchase or net disaster loss.
Know if you're entitled to the standard deduction. Those not entitled are
Know which itemized deductions you could be entitled to. There are several allowable tax deductions you can take if you itemize. These could be:
Look at your records and receipts. Although itemizing your deductions can lower your income tax amount, you need to be able to substantiate the allowable tax deductions (substantiate is a fancy tax word for "record keeping"). You can do this by keeping credit card receipts, regular receipts or daily journals.