This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is It Worth It to Itemize Your Taxes?

NEW YORK ( -- While the U.S. tax code is rife with loopholes, few people take advantage of them. Only about a third of taxpayers itemize their deductions, according to the federal Internal Revenue Service. In 2010, less than 30% of those making between $30,000 and $50,000 itemized deductions, according to an analysis by CNN. Meanwhile, 96.8% of those making $250,000-plus itemized.

The issue
Many taxpayers are giving Uncle Sam more money than they should, either out of haste or because the process of documenting tax deductions and filling out the 1040 income tax form intimidates them.

“Sometimes people get in a rush – they just want to finish and file their taxes,” says Lisa Greene-Lewis, a certified public accountant and blog editor at TurboTax, the tax software company.

So, to simplify things and speed the process, many taxpayers just take the standard deduction – $5,950 for a single taxpayer; $11,900 for a married couple filing jointly.  But the average amount of deductions for those who did itemize was more than $25,000, according to an analysis by CCH, a provider of tax, accounting and audit information, software and services for professionals in accounting firms and corporations.

The breakdown
The amount of deductions you claim can substantially lower your tax bill. For example, itemized deductions totaling $10,000 reduce taxes for a person in the 15% bracket by $1,500 – enough for a big screen HDTV. Additional deductions of $10,000 would cut taxes by $3,500 for a person in the 35% bracket.

Coming up with itemized deductions that will add up to more than the standard deduction is easier than you might think. There are about 350 deductions available, says Greene-Lewis. The biggest for most people is the mortgage interest deduction. The average mortgage interest deduction for households with an adjusted gross income of $50,000 to $100,000 was more than $10,000.

Homeowners can also deduct property taxes, Greene-Lewis notes. State and local income taxes can also be deducted.

The verdict
This is a no-brainer. Spend $40-$50 on tax preparation software such as TurboTax – and there are others from which to chose – and an hour at the computer to figure out if your possible itemized deductions add up to more than the standard deduction.

Pay your fair share, but don’t pay more than that.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.08 -0.58%
FB $117.89 -0.14%
GOOG $701.93 0.90%
TSLA $213.99 -3.90%
YHOO $37.03 2.90%


Chart of I:DJI
DOW 17,650.65 -0.61 -0.00%
S&P 500 2,049.81 -1.31 -0.06%
NASDAQ 4,720.7820 -4.8570 -0.10%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs