The 2024 tax-filing season has officially begun, and the IRS is already accepting returns for 2023. If you haven’t started to work on your taxes, now’s a good time to begin.
When filing your taxes, your goal may be to snag the largest refund you can. But one simple mistake might leave you with less money back from the IRS.
Don’t assume you shouldn’t itemize
Most taxpayers take the standard deduction on their tax returns rather than itemize deductions. But if you rush to claim the standard deduction without running the numbers, you could lose out financially.
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For 2023 (the year you’re filing a tax return for this season), the standard deduction is:
- $13,850 for singles and married couples filing separately
- $27,700 for married couples filing jointly
And in some cases, taking the standard deduction makes sense. But if you own a home, for example, it might make sense to do some number-crunching and see if you’ll end up with a larger deduction by itemizing.
Let’s say you’re a married homeowner, and you paid $17,000 in mortgage interest in 2023. Let’s say you also paid $6,000 in property taxes and $5,000 in state income taxes. The latter two expenses jointly max out at $10,000 as part of the SALT (state and local tax) deduction cap. But even so, right there, you have $27,000 in deductions.
If you also donated $1,200 to your local church last year, or a few different registered charities, suddenly, your total is $28,200. That’s $500 above the $27,700 standard deduction for married couples. So in this case, itemizing on your tax return allows you to exempt an additional $500 from taxes.
Will itemizing result in an audit?
Some people might shy away from itemizing on their tax returns because they worry that doing so will lead to an audit. But as long as you’re claiming legitimate deductions, and you have proof that they’re all valid, then there’s no reason not to itemize if it results in more tax savings.
Now that said, certain tax deductions may result in the IRS questioning your return. But that doesn’t mean they aren’t valid and that you won’t sail through an audit unscathed.
Let’s say you report an income of $60,000 for 2023, and you also claim $17,000 in mortgage interest and $6,000 in property taxes. To be fair, that looks suspicious. That’s a lot of money to be spending on housing with an income that size.
But maybe you receive financial support from a family member that allows you to pay for housing until your income increases. Maybe your income fell to $60,000 because your spouse took a career break, but you have a large emergency fund to live off of until they return to work in a year or two.
As long as you have an explanation for your tax deductions and they’re legitimate, there’s nothing wrong with claiming them. And you might as well do so if itemizing results in a higher tax break than the standard deduction has to offer you.
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