When individuals file their annual tax returns, they are confronted with the decision whether to itemize their tax deductions or simply take the standard deduction, as calculated by the U.S. government. The standard deduction is intended to take into account the totality of someone’s deductible expenses, including items like home mortgage interest and charitable contributions. For many homeowners, tax preparation would not be the same without the annual exercise of figuring out whether the deductible expenses added up to a larger amount than the standard deduction.
A Tampa CPA from Reliance Consulting, LLC, can remove the burden of calculating the amount of the deduction available through itemization and comparing it to the standard deduction to which you are entitled. The way it works is, the higher of those two numbers is deducted from a taxpayer’s income to generate the adjusted gross income (AGI). The amount of tax owed is then figured based on the AGI, minus any tax credits the individual might be entitled to claim.
The standard deduction differs, depending on your filing status. For the tax year 2013, the standard deductions are:
- Individuals – $6,100
- Married filing jointly – $12,200
- Head of household – $8,950
- Qualified widow or widower – $12,200
- Dependents – $1,000-$6,100
The primary advantage of taking the standard deduction, as opposed to itemizing your expenses, is money saved on filing costs. Each IRS form used to file a tax return costs a little bit extra, and itemizing requires more forms than simply taking the standard deduction. However, even if you choose the standard deduction, it can pay to calculate the potential deduction through itemization.
Contact a Tampa CPA from Reliance today to learn more.