How Much Do You Need in Deductions to File Itemized?

The federal government funds its operation primarily through the collection of income taxes. Not all income is subject to taxation. Federal tax law and regulation permits taxpayers to exempt a portion of their income from taxes either by claiming the pre-determined standard deduction or by itemizing their deductions. Claiming the standard deduction requires less work, but itemizing deductions might provide greater tax relief.

History

• Federal income taxes were first imposed on taxpayers as a means of funding the Union's war efforts during the American Civil War. Subsequent attempts to impose a federal income tax were struck down by the U.S. Supreme Court as being unconstitutional. The federal income tax was finally authorized with the passage of the 16th Amendment to the Constitution in 1913.

Features

• Taxpayers are not required to pay taxes on all of their income. Tax law passed by Congress and administered by the Internal Revenue Service (IRS) permits taxpayers to deduct specific amounts from their gross income. Taxpayers can use a standard deduction, which is based on their filing status, or they can itemize their deductions based on the payment of specific expenditures permitted by IRS regulation. The IRS recommends taxpayers figure their taxes both ways and elect the method that provides the lowest tax obligation.

Identification

• The amount of the standard deduction is based on the taxpayer's filing status. According to the IRS, for the 2009 tax year the standard deduction for single taxpayers and those who were married but filing separate returns was $5,700. Married taxpayers filing a joint return and qualifying widows and widowers could claim a standard deduction of $11,400. Taxpayers filing as head of household could claim a standard deduction of $8,350. Itemized deductions must exceed these amounts to be more advantageous than taking the standard deduction.

Considerations

• Not all taxpayers qualify for the standard deduction. Those who don't must itemize their deductions, according to the IRS. Non-resident aliens and dual-status aliens cannot claim the standard deduction. Certain trusts, estates, partnerships and taxpayers who are filing an income tax return for less than the full year might not be able to claim the standard deduction and must itemize. Taxpayers who are married but filing separate returns must both use the same type of deduction. If one taxpayer claims the standard deduction, the other taxpayer also must claim the standard deduction.

Itemized Categories

• Itemized deductions are listed on IRS Form 1040 Schedule A. Categories of items which can be deducted include medical and dental expenses, certain taxes, mortgage interest, charitable contributions, business use of the home, business use of vehicles, certain educational expenses, moving expenses resulting from a job change, un-reimbursed business travel expenses and certain casualty losses that were not covered by insurance. Amounts that can be deducted might be limited by current tax law and regulation.