Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive the maximum possible deduction could depend on whether your deduction is itemized or standard.

In some cases, you have no choice but to itemize your deductions, as you may not be eligible for the standard deduction. For instance, if your tax filing status is married filing separately and your spouse itemizes his or her deductions, or if there was a change in your annual accounting period that require that you file a tax return for a short year, you are not eligible for the standard deduction.

Tax professionals generally recommend that you itemize your deductions if you do not qualify for the standard deduction, have paid large amounts for items such as medical and dental expenses that were not reimbursed under a health plan, have paid interest and taxes on real estate that you own and/or you made large contributions to qualified charities.

If you are eligible for both options, you may want to determine whether your itemized deductions are more than the standard deduction amount. To be sure, have your tax professional prepare draft tax returns for both options. If you have already filed your return and discover that you made the wrong choice, all is not lost because you can file IRS Form 1040X to make the changes. Form 1040X generally must be filed within three years after the date you filed the original return or within two years after the date you paid the tax (if you are claiming a credit or refund).

Question answered by Denise Appleby, CISP, CRC, CRPS, CRSP, APA


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