Schedule A And Itemized Deductions – Important Info You Need To Know
Schedule A Used To Itemize Deductions
All taxpayers have the overarching goal of paying the lowest taxes legally possible and one of the greatest tax benefits (deductions) available is itemizing deductions on Schedule A .
Schedule A is required in any year you choose to itemize your deductions.
The Schedule A (that is filed as part of your Form 1040 individual tax return) is used to figure your itemized deductions. In most cases, your federal income will be less if you take the larger of your itemized deductions or your standard deduction.
What Are Itemized Deductions?
An itemized deduction is an eligible expense that individual taxpayers in the United States can report on their federal income tax returns in order to decrease their taxable income.
The Schedule A is a way to legally maximize your tax savings. Itemized deductions are common expenses such as:
- Mortgage interest
- Real estate taxes / property taxes
- State and local income or sales taxes
- Foreign Housing Deduction
- And more…
Schedule A And Itemized Deductions
Schedule A has seven categories of expenses that group these expenses (itemized deductions) in related categories:
- Medical and Dental Expenses: You generally can deduct only the part of your medical and dental expenses that exceeds 10% of your AGI (Adjusted Gross Income) – the amount on Form 1040, line 38. You can deduct medical and dental expenses that you paid for and were not reimbursed such as:
- Insurance premiums paid with after-tax dollars (you can’t deduct premiums paid with pre-tax dollars)
- Prescription medication
- Co-pays for doctor appointments
- Lab work
- And more…
- Taxes You Paid: This includes state and local income taxes paid or alternatively state and local general sales taxes (especially beneficial if you are a resident of a state with little to no state income taxes), real estate and personal property taxes (including registration for a vehicle if taxes are assessed based on the value of the vehicle).
- Interest You Paid: For the majority of taxpayers, this will include mortgage interest incurred from a loan for up to two homes. It can also include investment interest (limited to the amount of income claimed from investments),
- Gifts To Charity: Can be both cash and non-cash contributions made to a qualified charitable organization.
- Casualty and Theft Losses: You may be able to deduct part or all of each loss caused by theft, vandalism, fire, storm, or similar cause.
- Job Expenses and Certain Miscellaneous Deductions: You can deduct only the part of these expenses that exceeds 2% of your AGI (Adjusted Gross Income) – the amount on Form 1040, line 38. In this category, you can include the total ordinary and necessary job expenses you paid for which you were not reimbursed.
An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary.
- Other Miscellaneous Deductions: The most common deduction claimed in this category, particularly in Las Vegas… are gambling losses, but only to the extent of gambling winnings reported on Form 1040, line 21.
Each category has specific rules that apply to what can be claimed as an itemized deduction. A credentialed expat tax professional, such as the Enrolled Agents with Tax Samaritan, will be able to identify and apply the rules for your eligible itemized deductions.
Schedule A Tips
Retaining documentation that will substantiate and prove ALL items claimed on your return will serve you well in the event of an audit, and of course, during the preparation of your tax return. If you don’t maintain documentation and in the future are unable to prove a claim, the IRS will disallow the deduction.
Our goal at Tax Samaritan is to provide the best counsel, advocacy and personal service for our clients. We are not only tax preparation and representation experts, but strive to become valued business partners. Tax Samaritan is committed to understanding our client’s unique needs; every tax situation is different and requires a personal approach in providing realistic and effective solutions.
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Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities, the use and benefit of Schedule A and other topics, and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
All About Randall Brody
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.