If you already found the right Tax Preparer to do the job for you, you probably don’t need to worry on whether to itemize your tax deductions or to do a standard one. But it is important to choose one of them firsthand to give you an idea on how much you can expect to pay for this year. A lot of people have mistakenly chosen standard because, yes, it is indeed easier. Standard doesn’t require you to keep your records during the year and some people think their deductions aren’t worthy of the stress and effort to prepare.
A study conducted by the General Accounting Office showed millions of tax filers overpaid their taxes because they did not itemize their deductions. These people neglected to provide records or receipts to prove their deductible expenses resulting to unnecessary tax payments. It is therefore important to educate ourselves about itemized tax deductions to not only save money, but to possibly earn a much higher tax return.
Here are the top 5 reasons why it’s best for you to itemize your expenses for the year:
You Can Take Advantage of Your Expenses during the Year
There are times we spend more money than what we’re supposed to because of unnecessary and unexpected events. Use this as an advantage by itemizing large expenses that have incurred in the year. These large amounts can vary from uninsured medical and dental plan expenses, payments on mortgages, real estate taxes, reimbursed employee business expenses, uninsured casualty or theft losses, unreimbursed miscellaneous expenses, and charitable contributions. If these expenses are compounded, there’s a possibility it is higher than your standard deduction. The higher total of expenses you have, the lesser tax you have to pay.
Separate Filing Means Lesser Records to Keep for Married Individuals
Since it is mandatory for married individuals to itemize their deductions through filing married filing separately, each can therefore benefit from it by itemizing their own expenses. You do not have to worry about keeping what seem to be countless of receipts and records. If you each work on itemizing your deductions, paper works are not compounded easily and the lesser work is needed to gather them together. Like they always say, two heads are better than one.
Gives You Time to Think of Forgotten Expenses and Find Records
Sometimes we’re too busy and exhausted to think about how much we spent for the whole year and for which purposes. This is the most common reason why people run to a tax preparer right away and ask for a standard deduction. That’s understandable but itemizing your tax deductions will actually give you time to recall forgotten expenses that are of great importance and may largely affect your tax obligation. It gives you the chance to remember the payments and contributions you made for the year and find the necessary records to prove them.
Helps out Unfortunate Individuals
Imagine if the U.S Government did not pass the law giving the people the right to itemize their deductions. It will be hard for people who lost their assets from casualties or theft because, they did not have the money to pay for an expensive insurance. It’s the same way for those who cannot afford medical and dental insurance. You will realize the importance of itemizing your deductions once you experience to be in the same situation. Keeping records of you expenses might take time to accomplish but it does give you the chance to get back some of what you lost in case of unexpected events.
Encourages You to Donate To Charities
You may have heard of celebrities, politicians, and businesses donating huge amount of money to charities. Some of them may genuinely want to help, but most of them don’t. They are particularly aware of how their donations can do for them. The bigger amount of money they donate, the more money is deducted to their tax obligation. Although it is a clever trick some payers do every year, it somehow does make a difference as it encourages people to donate more to orphanages and various charities that badly needs funds.
Before you decide whether you’re going to do an itemized tax deduction or a standard one, talk to a trusted and professional tax preparer. Ask questions and determine whether your total itemized tax deductions is higher than the standard deduction amount. At the end of the day what matters is the amount of money you save.
