Finance Friday: Why Itemize Deductions?

Photographer: Arvind Balaraman, freedigitalphotos.net

In honor of tax season, I wanted to mention itemizing deductions. Because I am not a financial adviser it is my desire not to advise, but to peak your interest to learn more about your finances and how they are affecting you and your household.

Not everyone qualifies for itemizing deductions on their taxes, but among those that do qualify there are tax deductions that are often missed.

What are itemized deductions?

Itemized deductions are certain expenses (such as student loan interest, child care costs, breast pump supplies, mortgage interest expenses, job relocation expenses, charitable donations, some out-of-pocket medical expenses, etc) predetermined by the Federal government that are tax deductible. Eligible individuals who choose to itemize their deductions usually do so because their expenses are more than the standard deduction amount. There are some limitations, so I encourage to dig a little deeper and learn more about this topic and speak with your financial adviser about your personal options.

The Key

Keep track of your expenses; especially the ones that are allowed deductions. A full list can be viewed on the IRS website.
Keep your receipts for these expenses.
Know what deductions are available/relevant to you.

In my opinion, why itemize your deductions? If you have kept your receipts and your itemized deductions are greater than your standard deductions, you could potentially save you and your family thousands of dollars. It may even literally pay to itemize.

Additionally, there is an article on Kiplinger.com that liked, which discusses itemizing deductions by providing a brief over view of deductions available.

I am always interested in your thoughts about my posts so please feel free to comment.