Day 3: Decide on deductions
Today you choose between the standard or itemized deduction amount.
Most taxpayers use the standard deduction rather than bothering with tracking every expense to itemize. If the standard amount works for you, great!
If, however, your tax-deductible costs add up to more than the standard deduction amount, you'll want to maximize those expenses by itemizing.
These itemized deductions include:
- Home-related write-offs, such as mortgage interest and property taxes.
- Medical expenses.
- Charitable donations.
- State income taxes.
Go back to the material you collected on day one. Your W-2s will show how much state and local income taxes you paid. Dig out the receipts you got for all your deductible donations. And find that statement from the mortgage company showing your loan interest and property tax payments.
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Make sure you don't miss any, because all these amounts will help whittle your income to the lowest possible taxable amount.