Just go for the standard deduction?

[Melisande]

The last two years I did our taxes, I spent really quite some time on Turbotax entering in all our deductions, mainly mortgage interest and charitable donations. Each time, Turbotax finally informed me that we would get a bigger refund with the standard deduction. So, why did I spend 6+ hours doing all that -- tracking down all that info, etc.?

Seeing as how our situation hasn't substantially changed this year, I'm thinking of skipping all the fussy entering of all our donations (mostly small) to many different groups and just going for the standard deduction. But how do I know that this is really is the best thing to do?

If our standard deduction is $12,700, does this mean that we need at least this much in mortgage interest payments and charity combined? Or is there some other formula that is used? If we need at least that much, then it is clear that the standard deduction is best.

Maybe I could just do a quick and dirty run on Turbotax, entering estimated amounts and skipping the other data to see what it comes up with, then go back and put in the exact data if it looks like we'll get a bigger deduction this way. Would this work? I'm not a Turbotax expert, but I'm assuming I can go back and edit info.

Ideas?

[MDM]

If our standard deduction is $12,700, does this mean that we need at least this much in mortgage interest payments and charity combined?

Add state income tax, property tax, and possibly car registration fees to mortgage interest and charity, and you probably have it.  The full answer is "compare the result of Schedule A to $12,700" but the items above are likely the big ones.

[Melisande]

Great, thanks. We have no state income tax (FL -- one thing I love about living here) and I believe I entered the property tax with the mortgage interest info. In any case, all told it's not going to amount to $12,700. Whew!

[Melisande]

Oh wait, what about traditional IRAs? We just moved from Roth to traditional this year. Aren't these tax deductible?

[GillyMack]

I do exactly what you were thinking about in TurboTax every year.  I put in a one-line estimate with label “all charities” and do the other big deductions like prop taxes, etc. And see how close it is.   if it’s close to the limit, I go back and write over the estimate with a real donation, and add other real things.  If not and the  standard deduction wins hands down, then I just move on.  I even leave the estimates because if you don’t itemize, they don’t show up on any submitted forms. Lately, we haven’t been itemizing, but I do like to do a check to be sure.

[GillyMack]

IRAs are in a different part of the tax forms and don’t apply to the itemized deduction stuff.

[Melisande]

IRAs are in a different part of the tax forms and don’t apply to the itemized deduction stuff.

Well, I just entered the IRAs and apparently we can't deduct them because hubby's income is too high. I know, cry me a river, right?

So, it's back to the standard deduction again.

[GillyMack]

You may be able to recharacterize your IRA deduction back to Roth and at least do those.  The income limits for Roth’s are higher.  Play in TurboTax and switch your contributions.  TurboTax will let you know.

[MDM]

You may be able to recharacterize your IRA deduction back to Roth and at least do those.  The income limits for Roth’s are higher.

And if your income is too high for direct Roth contributions, consider a Backdoor Roth IRA.

[wenchsenior]

IRAs are in a different part of the tax forms and don’t apply to the itemized deduction stuff.

Well, I just entered the IRAs and apparently we can't deduct them because hubby's income is too high. I know, cry me a river, right?

So, it's back to the standard deduction again.

Even if your income was low enough to deduct IRAs, it wouldn't actually apply to the question you are asking. IRAs  and 401ks reduce your taxable income up front.  They don't play into calculations re: the itemizing vs standard deduction question. 

To your question, however, we are in a similar situation.  In a state with no income tax, but high property tax, we could only get any advantage by itemizing by 1) buying a second home (2 sets of mortgage interest) AND 2) 'doubling up' so we paid 2 years' worth of property taxes every other year and saved our charitable donations to make in the same 'doubling' years.   The past few times as our mortgage interest has shrunk, we've gotten only a few hundred dollars over, so it was hardly worth it to do the work.

With the passage of the new tax bill, it's moot now.  No more itemizing for the foreseeable future, which is one of the only features of the bill that I liked.  Presumably, if you are so close to the line, you also won't need to itemize any more going forward.

[BlueMR2]

I was borderline on itemizing back a number of years ago, never quite made it worthwhile.  After the last couple of tax changes plus MMM I can't even imagine blowing through enough money on qualified expenses for itemizing.