Many seniors have gotten into the habit of claiming the standard deduction instead of itemizing. That's because they typically pay little or no mortgage interest, and they usually don't owe much for state and local income and property taxes either. So the most common itemized deductions for the rest of us often amount to little or nothing for seniors. Plus folks age 65 and older get larger standard deductions. All that said, claiming the standard deduction may not be the right answer if you have significant medical expenses.

As you probably know, medical expenses can only be deducted to the extent they exceed 7.5% of your adjusted gross income (AGI). In adding up your expenses, don't make the common mistake of forgetting to count Medicare insurance premiums. Together with other out-of-pocket costs, Medicare premiums can easily put you over the 7.5%-of-AGI threshold and also cause your total itemized deductions to exceed the standard deduction amount. Here's the drill to find out if you can cut your tax bill by itemizing.

Step 1: Identify Expenses that Count as Medical Expenses

To figure out if you have enough medical expenses to benefit from itemizing, add up the following.

Premiums for Medicare Parts B, C, and D Coverage

Seniors enrolled in Medicare can count premiums for Medicare Part B coverage (for medical costs other than hospital bills), Part C coverage (for Medicare Advantage policies), and Part D coverage (for prescription drugs) as medical expenses.

* For most people, the 2011 Part B premium is $1,157 per covered person, but it can be up to $4,429 per person for higher-income folks (the 2012 premiums will be a bit higher, but we don't have the exact numbers yet).

* Part C premiums depend on the plan.

* Part D premiums average around $360 per covered person for 2011 (and will probably be about the same for 2012).

These Medicare coverage premiums are generally withheld from your Social Security benefit payments. If so, you can find the premium amounts for each year on Form SSA-1099 (Social Security Benefit Statement) which you should receive shortly after the end of each year.

Premiums for Supplemental Medicare Coverage (Medigap Insurance)

Seniors can also count premiums paid for private Medicare supplemental insurance policies -- often called Medigap coverage -- as medical expenses. The cost depends on the plan, but annual premiums can easily amount to $1,000 to $2,000 per covered person or more.

Premiums for Qualified Long-Term Care Coverage

Premiums for qualified long-term care (LTC) insurance also count as medical expenses, subject to age-based limits. For each covered person, count the lesser of: (1) the actual premiums paid in 2011 or (2) the age-based limit from below.

Out-of-Pocket Medical Expenses

Many seniors also incur significant out-of-pocket outlays due to insurance co-payments and deductibles and for dental and vision care. Be sure to add these into the mix.

Medical Expenses Paid for Relatives

Did you pay health premiums or uninsured medical expenses for a qualifying relative this year? If you did, count these expenses, too. For a person to be your qualifying relative, you generally must pay over half of his or her support for 2011, and the person must be your adult child, son-in-law, daughter-in-law, grandchild, father, stepfather, father-in-law, mother, stepmother, mother-in-law, brother, stepbrother, brother-in-law, sister, stepsister, sister-in-law, aunt, uncle, niece or nephew. It doesn't matter if the relative lives with you or not.

Step 2: Add Everything Up and Subtract 7.5% of AGI

As I said earlier, you can only claim an itemized medical expense deduction to the extent your total expenses exceed 7.5% of adjusted gross income (AGI). For example, say your 2011 AGI is $80,000, and you have $20,000 of medical expenses from the preceding expansive list. Your itemized medical expense deduction is $14,000 [$20,000 -- $6,000 (7.5% of your $80,000 AGI)].

Step 3: Add in Other Itemized Deductions and Compare to Standard Deduction

Now that you've learned you can claim a significant itemized deduction for medical expenses (even after subtracting 7.5% of AGI), the next step is to identify any other potential itemized deductions for 2011. These can include (among other things):

* State and local income and property taxes (including taxes on cars, boats, and other personal property).

* State and local general sales taxes (but only if you choose to claim them instead of claiming state and local income taxes).

* Home mortgage interest (if any).

* Charitable contributions.

Add these to your medical expense deduction, and see if the total exceeds your 2011 standard deduction amount of:

* $7,250 if you are unmarried and will be 65 or older as of 12/31/11.

* $13,900 if you file jointly, and both you and your spouse will be 65 or older as of 12/31/11 ($12,750 if only one of you will be that old).

* $9,950 if you use head-of-household filing status and will be 65 or older as of 12/31/11.

Obviously, if your total itemized deductions exceed the applicable standard deduction amount, you should forego the standard deduction and instead fill out Schedule A of Form 1040 to claim your rightful itemized deductions when you file your 2011 return next year.

The Bottom Line

If you do this drill, don't be surprised to discover that itemizing is the way to go. In fact, my own parents failed to itemize for three years when they could have. They got even by filing amended returns, but it's much easier to do it right the first time.