Today on MYM360 – One more thing about taxes – should you take the standard deduction or itemize? This could be the last year that you itemize so choose wisely. And, this is where good recordkeeping or access to your info for the past year comes in handy. With technology today it is fairly easy to get copies or at least look at so many of your transactions online. That is both a blessing and a curse because merchants then know so much about you. But I digress.
For this task, collect info on:
- Medical and dental expenses above a certain threshold
- State income taxes
- Property taxes
- Mortgage interest
- Unreimbursed employee expenses
- Charitable contributions
So, once you have all your info how do you decide which is the better option for you? Well, start with the easy part first – the standard deduction. This year the standard deduction for singles is $6,350 and $12,700 for couples filing jointly. The next step is to add up all of your expenses and if they come to more than the standard deduction, you should itemize.
For example, a married couple with mortgage interest, property taxes, state income taxes and charitable contributions which total of $20,000 should itemize because they will pay less in taxes since the standard deduction for them is only $12,700.
I should note that next year this decision could be quite different. The standard deduction for singles will rise to $12,000 and $24,000 for couples filing jointly. So in this case if they had no additional expenses, this couple would be better off using the standard deduction of $24,000. However, it should be noted that some deductions will be going away such as unreimbursed expenses and there are caps on mortgage interest and state income taxes. But for right now let’s stay focused on the present.
Want more answers like this or do you have a burning question you would like answered? I am feverishly working on the Minding Your Money Answer Book. I have been taking some of your questions, plus some of the podcast episodes and I’m compiling them into a book with quick answers to some of your everyday financial questions. So if you have burning question, send it to me at firstname.lastname@example.org and your question could end up in the book.
Thanks so much for listening and as always remember that minding your money really is the path to a richer life!