Retirement & Financial Planning Report

On your 2008 tax return, you can take itemized deductions (mortgage interest, state and local taxes paid, and so on) on Schedule A of your Form 1040 or you can take a standard deduction. Choosing the larger amount will cut your tax bill.

The "standard" standard deduction in 2008 is $5,450 for single taxpayers and $10,900 for married couples filing joint returns. There are some extras, though:

* On your 2008 return, homeowners who paid real estate property tax last year can add the amount paid to their standard deduction, up to certain limits: $500 for singles and $1,000 for joint filers. Therefore, the real standard deduction amounts are $5,950 or $11,900, for many homeowners.

* Taxpayers who are legally blind and those who are at least age 65 get another standard deduction: $1,050 for married individuals and $1,350 for singles. This can be taken in addition to the extra standard deduction for homeowner. Thus, if you and your spouse are both over 65 and you paid property tax last year, your standard deduction might be $10,900 plus $1,000 plus $1,050 plus $1,050, for a total of $14,000.

The bottom line is that you should not assume itemizing will be a better choice. Crunch the numbers carefully. If you did not pay much mortgage interest or state income tax last year, taking the standard deduction might save taxes.