Itemizing worth a closer look

NEW YORK — With the holidays approaching, the thought of year-end tax planning is likely to induce headaches rather than visions of sugar plums.

But if you want to boost tax savings by itemizing, now’s the time to total the receipts and see if your expenses push you past the standard deduction.

Tax experts suggest compiling receipts now while there’s still four weeks left to bunch expenses (or schedule big-ticket procedures like root canals) within 2004 — especially if you’re close to the edge.

Only about a third of tax filers — often, homeowners who pay mortgage interest and property taxes — itemize their taxes, according to IRS statistics.

The rest take the standard deduction, which in 2004 is $4,850 for most single filers and $9,700 for joint filers.

The advantage of itemizing is that you can write off charitable donations and other expenses for maximum tax benefits.

Many leave tax savings on the table by assuming they don’t qualify for itemizing.

“Some people are just kind of lazy and they take the standard deduction automatically,” said Bob Scharin, editor of Warren, Gorham & Lamont/RIA’s Practical Tax Strategies, a monthly journal for tax professionals.

This year, more people are expected to itemize because of a change that allows the deduction of sales taxes in lieu of state and local income taxes. Residents of Washington will benefit because the state doesn’t have an income tax.

So with the year winding down, now’s the time to crunch numbers and see where you stand in terms of itemizing for 2004.

The big figures to add up — as outlined on the Schedule A form for itemized deductions — are medical and dental expenses, taxes you paid, mortgage and investment interest, gifts to charity, casualty losses, and miscellaneous deductions.

Keep in mind that political contributions don’t count, even if it’s an election year. And one last warning: Consider that more deductions could bring more scrutiny from the IRS.