Taxes when to itemize your deductions?

Question

My friend said he made around 70,000 this year and bought a house this year and he only paid 5,000 in interest and about 1500.00 in property taxes.. would he itemize his tax return?His tax guy said you want to have 10,000 in interest etc.. before you itemize is this true? I told him I thought he would get more back if he itemized no matter what?If I am incorrect shouldn't he just donate the difference to his local church etc to make up the difference?

Answer 1

It depends on his personal situation. If you are married filing jointly you get a standard deduction this year of $10,700, so would get no benefit from itemizing unless your deductions were over that. If you're single, though, the standard deduction is $5350 so he'd have enough to itemize.

Uh, if he's below the standard deduction and so he donated the difference to get up to the amount to itemize, he'd only save a percentage of what he donated - say he needed a donation of $2000 to get up to the standard deduction amount, he'd pay out $2000 and only break even on his taxes since he would otherwise get the standard anyway. And if he donated $3000 instead, and is in a 15% bracket, he'd save $150 on his taxes because of the donation.

You are allowed to itemize even if your itemized deductions are less than your allowable standard deduction, but would be pretty silly to do so since it would cost you extra in tax money. The standard deduction is an amount you can subtract without listing or proving anything - you have a choice of EITHER the standard or itemized deductions, can't take both.

So yes you are incorrect.

Answer 2

The $5,000 of mortgage interest, and the $1,500 in real estate taxes, are both fully deductible. He should take his closing documents to a tax preparer because there may be additional amounts that can be deducted related to the mortgage.

In addition, he will be able to deduct state and local taxes on Schedule A.

If his Schedule A total is more than his standard deduction, he will benefit by using Schedule A rather than taking the standard deduction. The standard deduction is $5,350 for a single taxpayer, and $10,700 for a married taxpayer (neither blind nor age 65 or older).

Donating additional amounts to charity to be able to benefit from itemizing deductions will not save him any money. If he donates $1,000 of cash or goods, and his tax rate is 25%, he is saving a maximum of $250 on his taxes. He may in fact be saving nothing.

Answer 3

You only itemize if the total for schedule A is more than the standard deduction. (You take if the standard if it's higher.)

For someone who is married, the standard deduction is $10,700 for 2007. For singles it is $5350.

While it's good to donate to charity, the difference on taxes is less than the value of the donation so no one would do it just to get the deduction.

Answer 4

Hi. you do your taxes two ways.The first way you do them, you TAKE the deduction the Gov. gives you as a automatic deduction to see how you will come out as paying or not.The next way is to itemize your deductions and see how they come out.YOU naturally take the one with the largest return for you.Do this every year and you can not go wrong. Good Luck.

Answer 5

If your friend is single that in order for your friend to itemize his deductions he must exceed his standard deduction of $5350, if your friend is married then your friend's deductions have to exceed the standard deduction of $10,700.

Answer 6

Go to the IRS website, run through the numbers, and figure it out.