Itemized vs Standard deduction: Why is it still wanting me to take the itemized deduction when the standard deduction is higher?

[Tito1207]

Initially, TT Premier gave me the Standard Deduction, the only change made after getting the 

standard deduction was a bank interest earned amount.

Now after recalculating, it provided me with itemized deductions and almost doubled the refund.

Here's what it looks like now, the itemized deduction amount is less than the standard deduction by $1,338.

Why is it still wanting me to take the itemized deduction when the standard deduction is higher?

The tax return is complete and I have checked every input to the originally issued documents and there are no issues. Turbo Tax says there are no errors or changes required. The only other consideration is that the credit amounts applied would (or may) affect the overall computation for taking the Itemized Deduction over the Standard Deduction, is that the reason?? After further review, it was noticed that the Alternative Minimum Tax (AMT)  credit for prior years, was significantly increased when taking the Itemized Deductions (even though the Standard Deduction is lower than the Itemized Deductions (the AMT for Standard deductions is less than in the AMT for Itemized Deduction). 

Bottomline? The AMT may be what causes Turbo Tax to recommend taking Itemized Deduction. 

[JohnB5677]

If you added income, and you doubled the refund, there's one possibility.

Did you get any of these credits:

• Child and Dependent Care Credit 
• Saver's Credit
• Residential Clean Energy Credit

They are all non-refundable, which means they are only good to reduce your taxes to zero.  Once your total tax amount reaches zero, the credit awarded stops.

By making your deduction smaller, you would owe more tax.  Any credit not used could then be activated.

This would account for your income going up, and your refund also going up.

[Tito1207]

John,

Thank you for your response, unfortunately none of the credits mentioned apply to me. What concerns me as previously mentioned is the software first recommended the Standard Deduction, then only after adding the interest income ($XXX) the software recalculated resulting in the recommendation of Itemized Deductions and doubling the refund. Also I failed to mention that in addition to a small amount of interest income, I had also included a very small cash contribution (under $500) that was not included in the initial Standard Deduction recommendation. It should not have an impact on moving to Itemized Deductions. 

Review of the 2025 summary of Deductions and Credits indicated a significant increase in the AMT. 

It must be the  significant increase AMT that is causing the Itemized Deduction recommendation.

Regardless of the reason, it doesn't make sense and if the return is submitted with the "Itemized Deduction recommendation," the Service will make any necessary corrections. It has to be that the AMT and Withholding credits amount have exceeded the Standard Deduction benefit.

Hopefully, the the TT Premier "Itemized Deduction recommendation" is correct 🙂

I considered uninstalling the software and re-installing but after paying $110 for this program, if it turns out it's the software that is corrupted, I might as well buy from another vendor and take my chances with them next year.

[DawnC · Accepted solution]

Taxpayers can choose to use the standard deduction, or they can itemize deductions. When given a choice, choose the option that results in a lower tax bill.  Even if your itemized deductions are lower than the standard deduction, itemizing can still help if you are subject to the Alternative Minimum Tax (AMT).

The standard deduction is removed entirely from the AMT, however, some itemized deductions may remain in place (or are reduced) under the AMT. Therefore, choosing your lower itemized deductions can improve your net tax on the AMT side.

• AMT eliminates the standard deduction
• Some itemized deductions still apply under AMT
• If AMT is in play, choosing itemized deductions—even smaller ones—can lower total tax

[Tito1207]

Dawn,

Thank you for your response, I totally agree with you. After much analysis, I've come to the same conclusion that the AMT must the the contributing factor for TT Premier's recommendation.

I plan to file my return based on TT Premier's recommendation.

Thank you and John for your assistance. 🙂