Itemizing could save you money

Generally, you are allowed to deduct on your income tax return the greater of your itemized deductions or the standard deduction.  Yet each year hundreds of thousands of taxpayers overpay their taxes because they claim the standard deduction when itemizing would save them money.

Compare methods.  Every taxpayer should compare the standard deduction to his or her actual deductible items (such as medical expenses, mortgage and investment interest, property and state income taxes, casualty losses, and job-related expenses).  The comparison should be made each tax year.  The fact that you didn't itemize in a prior year does not keep you from doing so on this year's tax return if you qualify.

Basically, the standard deduction amount is determined by your filing status.  If you're 65 or older, blind, or can be claimed as a dependent by another taxpayer, you have a different standard deduction.  For 2001, the standard deduction amounts are:

• Single  $4,550

• Married filing jointly  $7,600

• Head of household  $6,650

• Married filing separately  $3,800

• Additional for elderly or blind (if married)  $900

• Additional for elderly or blind (if single)  $1,100

If you are the dependent of another taxpayer (i.e., a child claimed on a parent's return), your standard deduction is the greater of 1) $750, or 2) $250 plus earned income, not to exceed the regular standard deduction.

If a married couple files separate returns and one spouse itemizes deductions, the other spouse must also itemize.  Or they can each take the standard deduction of $3,800.