What's the Difference Between the Standard Deduction and Exemptions?
If you don't itemize, the standard deduction for tax year 2007 is as follows:
$5,350 if you file as single
$7,850 if you file as Head of Household
$10,700 if you're married filing jointly or are a qualifying widow(er)
$5,350 if you're married filing separately
You're entitled to an additional deduction, depending on your filing status, if you're over age 65 or legally blind (see Form 1040). If you can be claimed as a dependent on someone else's return, your standard deduction may be limited.
Should I Itemize or Take the Standard Deduction?
To determine if you have enough deductions to itemize, use Schedule A (included with the long version of Form 1040) to list all of your allowable expenses, and compare the total to the standard deduction for your filing status. If your allowable expenses are more than the standard deduction, you can itemize.
Over the years, the number of allowable deductions has been shrinking, so it's increasingly difficult to itemize. Mortgage interest is the major allowable deduction for most people, and unless you have a very small mortgage, you probably paid enough interest to put you over the standard deduction and make it possible for you to itemize.
What Expenses Are Allowable Deductions If I Itemize?
Some of the most common allowable expenses include:
State and local income taxes;
Real estate taxes (if your taxes include service fees for things like trash pickup, recycling, etc., only the portion related to the value of your property is deductible);
State and local personal property taxes based on the value of personal property such as cars or boats;
Mortgage interest;
Charitable contributions;
Medical expenses (but only if they exceed 7.5% of your Adjusted Gross Income
More Tax Related Resources:
Make Tax Filing Easier with These Record Keeping
Adjusting Your Paycheck Withholdings
Avoid Tax Refund Anticipation Loans
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