What’s the best way to decide on the tax form to use? Naturally, it’s the one that leaves more money for me. But how do I pinpoint which form will help retain more of my income? The answer seems to hinge largely on deductions.
As a young couple, my spouse and I are faced with a pertinent question. Should we opt for the standard deduction set at $11,600 for a couple filing joint tax returns, or should we itemize our deductions? Choosing the standard deduction seems straightforward. However, the concept of itemizing our deductions sounds intricate and we’re uncertain if our itemized list would surpass the pre-set standard deduction. Frankly, it might actually be less.
So, what can we categorize 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 assigned $700 to our Flexible Health Spending Account (FSA), which is tax-deductible. Aside from that, there isn’t much else to add. In 2012, I made a contribution of $5,000 to our FSA account in order to undergo Lasik Eye Surgery. The prospect of surgery excited me, but I was discontented with the fact that it wipes almost $500 off my monthly income.
State income taxes: Based on my last paycheck, I have contributed over $2,200 in state income taxes. I’m unsure of my spouse’s contributions since I don’t have access to his pay stubs. However, given that he was unemployed for 5 months, I suppose it won’t significantly increase the figure.
Charitable contributions: Our record on this end is fairly dismal. There was a phase when we made regular contributions to our church, but those ceased when my husband lost his job. I am optimistic about resuming those this year.
Job expenses: This category is complicated, given the numerous specific requirements, including job-hunting expenses. My husband’s academy, including his trips to Seattle, Arizona, Nevada, and northern California for job tests and interviews, can be considered. The total spent on his travels and schooling approximated to $5,500, though we don’t have exact amounts unless we retrieve all the receipts. And to be honest, I doubt we saved them all.
Comparing the standard and itemized deductions, the latter sums up to around $8,400, which falls short of the $11,600 standard deduction. We also need to consider the form-filing costs – the longer tax form (itemizing) is more expensive than the shorter one (standard deduction), adding a few hundred dollars to the cost. Hence, it’s crucial to ensure that itemized deductions are sufficiently high to justify this extra expense.
My knowledge of taxes is limited, mostly gleaned from what I’ve read online. So, how do you decide which tax form is ideal for you? Do you prefer itemizing deductions, or sticking to the standard deduction?
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