Itemizing deductions: Three facts you should know

You know the general rule about itemized deductions: Compare your total allowable expenses against your standard deduction, and use the amount that provides the greatest tax benefit.
Illustration. If you're under age 65, married filing jointly, itemizing may reduce your 2008 tax bill if your qualifying deductions are greater than the basic 2008 standard deduction of $10,900 ($5,450 for single filers under age 65).

Here are three other facts about itemizing you may be less familiar with.

1. There's a special rule when you're married and file separate returns. If either of you itemizes, the other's standard deduction amount is usually considered to be zero. When this situation applies, you'll generally be better off itemizing no matter the amount of your allowable expenses.

2. Your itemized deductions may be limited. For instance, unreimbursed medical expenses are deductible only if the amount you spent exceeds 7.5% of your adjusted gross income (AGI). Miscellaneous deductions such as certain legal fees must equal more than 2% of AGI to be deductible.
In addition, if your AGI for 2008 reached $159,950, the total amount of your itemized deductions is reduced.

3. You can itemize even though your standard deduction is higher. Why would you want to? One reason: The standard deduction isn't considered in the computation of the alternative minimum tax (AMT), but some itemized deductions are. If you're subject to the AMT, in certain cases your overall tax liability may be less if you choose to itemize.
Other rules may apply to your situation. For help with the calculations or with any of your tax filing concerns, give us a call (508)679-6079