Should I take the standard deduction or itemize my deductions?

The simple answer to this question is that you should take whichever deduction is larger. So if you calculate your itemized deductions and realize that the amount of the standard deduction is greater, you would be better off taking the standard deduction because it would provide you with a lower taxable income amount. However, there are also certain times when you might want to itemize rather than taking the standard deduction, even if the standard deduction is greater. For example, itemizing your deductions may provide you with a greater benefit as to your state taxes, which may offset the benefit you lose with your federal taxes by not taking the standard deduction. In addition, if you are subject to the alternative minimum tax (the “AMT”), itemizing may be advantageous because the standard deduction does not apply in calculating the AMT but some itemized deductions do.

Finally, there are three instances where you do not have a choice in the matter and must itemize your deductions: (i) if you are married and filing a separate return from your spouse, and your spouse is itemizing deductions in his/her return, you must also use itemized deductions in your return; (ii) if you were not a resident of the United States during the year, or you were a dual-status alien, you must itemize your deductions; and (iii) if you have changed your annual financial/accounting year so that the tax return you are filing does not cover a full tax year, you must itemize your deductions.