"I can't itemize any more." It sounds like a refrain from a country music ballad. But it’s a statement made by more and more taxpayers every year. In fact the IRS estimates that nearly two out of three filers now take the standard deduction. Part of the reason is that the amount of the standard deduction has increased in recent years. It increases each year to keep pace with inflation. Also, in 2003 the standard deduction for married filers increased sharply to help reduce the marriage penalty.

Don’t think that you’re losing out just because you don’t have enough deductions to itemize. In fact, the reverse is true. Generally, if your itemized deductions are less than the standard deduction, it means the IRS is giving you some extra deductions. Here’s how that works.

An example. Let’s say that you and your spouse file a joint return. When you add up your itemized deductions for the year, they total $9,000. But the 2006 standard deduction for a joint filer is $10,300. So you’re able to subtract $10,300, the standard deduction, from your adjusted gross income. That’s $1,300 more than your actual deductions. In effect, the IRS is granting you that extra $1,300. Your taxable income will be $1,300 lower than if you used your actual deductions.

So next time you hear someone complain that they can no longer itemize deductions, don’t feel sorry for them. Just point out that they’re getting a break by using the standard deduction.

Seattle Tax Accountant