Tax tips for itemized deductions and tax refunds

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Should You Itemize?

Whether to itemize tax deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses, and miscellaneous tax deductions can reduce your taxes and/or increase your tax refund. If the total amount spent on those categories is more than the standard tax deduction, you can usually benefit by itemizing.

The standard tax deduction amounts are based on your tax filing status and are subject to inflation adjustments each year. For 2006, they are:

Single $5,150
Married Filing Jointly $10,300
Head of Household $7,550
Married Filing Separately $5,150

Each may taxpayers have different standard tax deductions. The standard deduction is more for taxpayers age 65 or older and for those who are blind. It is generally less for those who can be claimed as a dependent on some other taxpayer’s return.
Your tax deductions may be limited. Your itemized deductions may be limited if your adjusted gross income is more than $150,500 or $75,250 for Married Filing Separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses, gambling losses, and investment interest.
Married Filing Separately? When a married couple files separate tax returns and one spouse itemizes deductions, the other spouse must also itemize and cannot claim the standard tax deduction.
Eligibility for the standard tax deduction will vary by taxpayer. They include nonresident aliens, dual-status aliens, and individuals who file tax returns for periods of less than 12 months.
Deduction Forms to use. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

Source: IRS.gov - IRS TAX TIP 2007