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When you file a tax return, you usually have a choice to make: whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

1. Figure your itemized deductions.  Add up the cost of items you paid for during the year that you might be able to deduct. Expenses could include home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.

2. Know your standard deduction.  If you do not itemize, your basic standard deduction amount depends on your filing status. For 2012, the basic amounts are:

• Single = $5,950
• Married Filing Jointly  = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900

Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return. Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions.

3. Choose the best method.  Compare your itemized and standard deduction amounts. You should file using the method with the larger amount. To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions.

Many of the provisions associated with the American Taxpayer Relief Act of 2012 (ATRA) became effective in 2013. Read more

 

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As the year draws to a close, it is a good time to take stock of your tax situation and identify possible opportunities to minimize your tax liability. Read more

2014 Tax News

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