You may need to itemize your taxes if your total itemized deductions exceed the standard deduction allowed for your filing status. Itemized deductions can include expenses such as:
- Medical and Dental Expenses: If you have significant unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).
- State and Local Taxes: Including state income taxes or sales taxes, and property taxes, limited to a combined total of $10,000 ($5,000 if married filing separately).
- Mortgage Interest: Deductible interest on mortgage loans for your primary residence and, in some cases, a second home.
- Charitable Contributions: Donations made to qualified charitable organizations.
- Casualty and Theft Losses: Losses from federally declared disasters.
- Other Deductions: Certain unreimbursed business expenses, investment interest expenses, and other specific deductions.
In general, if the total of these deductions is greater than the standard deduction for your filing status, it makes sense to itemize. For the tax year 2023, standard deductions are:
- $13,850 for single filers
- $27,700 for married filing jointly
- $13,850 for married filing separately
- $20,800 for heads of households
Additionally, some taxpayers may choose to itemize even if their deductions are slightly less than the standard amount, often for specific tax benefits, or if they have special situations such as being subject to the alternative minimum tax (AMT).
It's important to evaluate both options each year to see which one provides the greatest tax benefit. Consulting with a tax professional or using tax software can help you determine the best approach for your situation.