Tax Season Hot Topic: The Standard Deduction vs. Itemized Deductions

A tax attorney at law firm Hoogendoorn & Talbot LLP explains the difference between itemizing deductions versus taking the standard deduction.
By: Hoogendoorn & Talbot LLP
 
CHICAGO - April 13, 2015 - PRLog -- The federal income tax filing deadline for individuals is Wednesday, April 15. Itemizing expenses or taking the standard deduction is a pivotal point of analysis that tax professionals assess in preparing individual tax returns. Taxpayers who wish to deduct expenses on their returns should be aware of the key threshold amounts for certain expenses and limitations on various types of expenses, according to Attorney Christopher Floss.

Floss, an Associate Attorney at Chicago law firm (http://www.hoogendoorntalbot.com/chris-floss/) Hoogendoorn & Talbot LLP, is an authority on tax law issues (http://www.quora.com/Christopher-Floss), such as individual itemized deductions. “The taxpayer can determine his or her best course of action very simply,” he notes. “If the total amount of allowed itemized deductions is greater than the standard deduction, then itemizing expenses on Schedule A of IRS Form 1040 produces the better result. If a taxpayer does not have enough allowable expenses to itemize, then he or she is left with taking the standard deduction amount.”

“Understanding the difference between itemizing deductions versus taking the standard deduction is key to understanding how your income tax is calculated,” Floss notes. The standard deduction is an amount determined by Congress each year that taxpayers are allowed to deduct from their adjusted gross income (AGI) if they do not itemize.  Itemized deductions, however, are eligible expenses that taxpayers can report on IRS Form Schedule A to decrease their AGI. Itemizing expenses is a key way in which a taxpayer has the ability to reduce their AGI, which yields a lower amount of income subject to tax.

The easiest way to determine the categories of expenses that may be itemized is to review IRS Form Schedule A. In summary, the types of expenses reported on this form are as follows: medical expenses, taxes paid, interest paid, gifts to charity, casualty and theft losses, job expenses and other miscellaneous deductions.

Floss advises clients to keep detailed accountings of all expenses that will be listed as itemized deductions.  “Certain categories of expenses have their own ‘substantiation’ requirements,” Floss reports.  “Nonetheless,” Floss states, “all expenses need to be supported with receipts and accurate accountings so that they will withstand examination.”

Each of these categories has its limits and considerations.  Changes to the Tax Code during the past two years have imposed additional limits on the total amount of deductions a taxpayer can claim on Form 1040.  Factors such as the taxpayer’s filing status and AGI are key in determining whether the allowed itemized amount will be restricted under current tax law.

Floss and the tax experts at Hoogendoorn & Talbot encourage taxpayers to consult IRS publications listed on the IRS website, as well as competent tax professionals, for further guidance on this topic.

Hoogendoorn & Talbot LLP, founded in 1985, is a law firm that focuses on representing families, business entities and charitable organizations.  Each year, the firm and its partners donate a portion of their time, talent and revenue both to secular not-for-profit entities and faith-based organizations.

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