Find Out If Itemizing Deductions is Beneficial Now Instead of Waiting Until April

Part of sound financial planning is making sure that you don't pay more taxes than necessary, which means you need to have at least a basic understanding of tax deductions. If you prepare your own taxes, this is extremely important, but even if you have an accountant or use the assistance of a tax preparer, the more informed you are, the more likely you'll be to find all eligible deductions.

What Is Itemizing?

Each year when you file your income tax return, you have to choose between using the standard deduction (a flat amount) or claiming your actual allowed deductions, called itemizing. If your actual expenses exceed the standard deduction, you'll save money by itemizing. For the 2008 tax year, the following are the standard deduction amounts:

• Single: $5,450
• Head of Household: $8,000
• Married Filing Joint: $10,900
• Married Filing Separately: $5,450
• Qualifying Widow/Widower: $10,900

These standard deductions can help you determine whether or not it would be beneficial to itemize or not. For example, if you are married and filing jointly and own a home, look to see how much you will pay in interest and property taxes in 2008. If you have a decent sized mortgage and are still in the early years of payments, you might be over the standard deduction of $10,900 from interest and property taxes alone. Of course, every situation is different, so you or your accountant will have to sit down and do the math to determine whether standard or itemized would be best.

For more information on tax deductions:

• Qualifying for the Home Office Deduction
• Deductions and Credits
• Deciding Whether or Not to Itemize