The obvious answer is that if your itemized expenses exceed the standard deduction, you should itemize. That being said, if you don’t have the actual receipts and supporting documentation to justify claiming those expenses, then you run the risk of losing those deductions as a result of an audit, which can be costly from an interest and penalties perspective. Not to mention, you’ll likely need to hire a tax professional to assist you with IRS correspondences.
When determining whether or not you should or shouldn’t itemize depends on a multitude of factors, you can certainly run a quick test though to determine if considering itemizing even make sense. First, it’s important to note what the standard deduction amounts are for 2015: $12,600 for joint filers and $6,300 for single filers. This means that if your potential itemized expenses aren’t even close to these amounts, you know you’re going to be taking the standard. In addition, you could even look at your 1098-T from from your lender (assuming you have a mortgage) to compare that figure with the standard deduction. Generally, the home mortgage is the largest itemized expense item. Furthermore, there are certain user personas that typically itemize on their returns: property owners, those with large medical bills, charitable givers, and those with substantial casualty losses and un-reimbursed expenses. If none applies, you’re probably going to be taking the standard deduction.
Do you have more tax deduction questions related to whether or not you should itemize or claim the standard deduction? If so, please contact us.