What’s the best way to choose the right tax form? Naturally, I want to pick the one that keeps more money in my pocket. But how do I figure out which form will help me hold onto more of my income? The answer mainly lies in deductions.
As a young couple, my spouse and I are grappling with an important question. Should we go for the standard deduction, which is $11,600 for a couple filing jointly, or should we itemize our deductions? Choosing the standard deduction seems easy. However, itemizing deductions feels complex and we’re unsure if our itemized list would exceed the standard deduction. Honestly, it might even be lower.
So, what can we include under itemized deductions?
The list includes:
– Medical expenses
– State income taxes
– Property taxes
– Home mortgage interest
– Charitable contributions
– Casualty and theft losses
– Job expenses
– Miscellaneous deductions
Since we don’t qualify for property taxes, mortgage interest, or casualty and theft losses, we can only consider the following:
Medical expenses: We have $700 allocated to our Flexible Health Spending Account (FSA), which is tax-deductible. Beyond that, there’s not much else. In 2012, I contributed $5,000 to our FSA for Lasik Eye Surgery. I was excited about the surgery but unhappy that it cut almost $500 from my monthly income.
State income taxes: From my last paycheck, I’ve paid over $2,200 in state income taxes. I’m unsure about my spouse’s contributions since I don’t have his pay stubs. He was unemployed for 5 months, so I assume it won’t add much to the total.
Charitable contributions: We aren’t doing well in this area. We used to donate regularly to our church, but that stopped when my husband lost his job. I hope we can resume those donations this year.
Job expenses: This category is tricky because of the many specific requirements, including job-hunting expenses. My husband’s academy, along with his trips to Seattle, Arizona, Nevada, and northern California for job tests and interviews, counts. We spent around $5,500 on his travels and schooling, but we don’t have exact amounts unless we gather all the receipts. Honestly, I doubt we kept them all.
Comparing the standard and itemized deductions, the itemized total comes to around $8,400, which is less than the $11,600 standard deduction. We also need to consider that itemizing costs more in terms of filing, adding a few hundred dollars to the expense. Therefore, itemized deductions need to be high enough to justify this extra cost.
I have limited knowledge about taxes, mostly from reading online. So, how do you decide which tax form is best for you? Do you prefer itemizing deductions, or sticking to the standard deduction?