I bought my first house last year and I'm trying to figure out if I should itemize or take the standard deduction. With mortgage interest, property taxes, and some charitable donations, I think I might be close to the threshold.
The standard deduction seems so high now ($13,850 for single filers I think?) that I'm wondering if itemizing is even worth it anymore unless you have really significant deductions.
What are the main things people consider when deciding between itemized vs standard deduction? I've heard state and local taxes can be a big factor, but there's a $10k cap on that now, right?
Also, does it make sense to alternate years - like itemize one year when you have big medical expenses or something, then take standard the next? Or is that more trouble than it's worth?
We bought our house 3 years ago and went through the same itemized vs standard deduction decision. With the higher standard deduction now ($13,850 single, $27,700 married filing jointly), itemizing only makes sense if your deductions exceed those amounts.
For us, the main items were mortgage interest, property taxes (capped at $10k for state and local taxes), and charitable donations. We also had some medical expenses one year that pushed us over.
What I'd suggest is gather all your potential deductions first. Mortgage interest statement (Form 1098), property tax records, charitable receipts, medical bills over 7.5% of your AGI, etc. Add them up and see if they beat the standard deduction.
One thing about the itemized vs standard deduction choice: if you itemize, you have to keep detailed records in case of audit. With standard deduction, it's much simpler.
The itemized vs standard deduction analysis has changed dramatically since the 2017 tax law. The standard deduction nearly doubled, while many itemized deductions were limited or eliminated.
For most homeowners now, itemizing only makes sense if:
1. You have a large mortgage (interest is deductible on first $750k of debt)
2. You live in a high-tax state (SALT deduction capped at $10k)
3. You make significant charitable contributions
4. You have large medical expenses (over 7.5% of AGI)
The $10k SALT cap really hurts in high-tax states. Before 2017, people in states like CA, NY, and NJ could deduct all their state and local taxes. Now they're limited to $10k regardless of how much they pay.
For your itemized vs standard deduction decision, I'd run the numbers both ways. Tax software makes this easy - it calculates which gives you the lower tax bill.
As a freelancer, my itemized vs standard deduction situation is different because I can deduct business expenses on Schedule C. Those are separate from itemized deductions.
But for personal deductions, I've found that bundling deductions can make itemizing worthwhile in alternate years. For example, instead of giving $5k to charity each year, I give $10k every other year. That way, I itemize in the year I make the large donation and take standard deduction the other year.
Same with medical expenses - if you have elective procedures, try to schedule them in the same year to get over the 7.5% of AGI threshold.
The itemized vs standard deduction decision also affects state taxes. Some states don't allow itemizing if you take standard deduction on federal, or they have different rules. Check your state's requirements.
We've been taking standard deduction since the change, even though we own a home. Our mortgage isn't huge and we're in a moderate-tax state, so our itemized deductions come in around $20k - just under the $27,700 standard deduction for married filing jointly.
The itemized vs standard deduction choice became a no-brainer for us. Standard deduction is higher, and we don't have to keep track of receipts or worry about audit risk.
One thing to consider: if you're close to the threshold, it might be worth bunching deductions like the previous poster mentioned. But for us, the simplicity of standard deduction wins.
Also, remember that if you take standard deduction, you can still deduct student loan interest and educator expenses above the line. Those don't require itemizing.
The itemized vs standard deduction decision really depends on your specific numbers. Here's what I'd suggest:
1. Get your mortgage interest statement (Form 1098) - this is usually the biggest item
2. Add up property taxes (remember the $10k SALT cap includes state income tax too)
3. Track charitable donations (cash and non-cash)
4. Medical expenses over 7.5% of your AGI
5. Other miscellaneous deductions (investment expenses, casualty losses - though these are limited)
If the total is close to or above the standard deduction, itemizing might make sense. But remember, itemizing means more paperwork and potentially higher tax prep fees.
One strategy for the itemized vs standard deduction dilemma: use tax software that lets you try both methods. Most programs will calculate which gives you the better result automatically.