Itemized Deductions: IRS Oublication #5307
Each year, taxpayers will take the higher of their allowed standard deduction or their allowed total itemized deductions
Itemized Deductions are reported on Schedule A, Form 1040.
The standard deduction is based on the tax year being filed, the taxpayer's filing status, and the taxpayer's age. The IRS generally increases this amount each year.
Itemized Deductions on Schedule A, Form 1040 generally consist of the following deductions.
Each have specific criteria applied to them:
1-Medical Expenses (SEE MY WORKSHEET FOR A LIST OF MEDICAL EXPENSES) (ALSO 7.5% Adjusted Gross Income Threshold Limit Applies)
2-State & Local
State Income taxes or general sales tax
Real estate tax (deductible "in the year actually paid").
Personal property tax
NOTE: Currently, the deduction taxpayers can take for these taxes combined is limited to $10,000 ($5,000 if married filing separately)
3-Home Mortgage Interest & Points
4-Home Equity Loan Interest
5-Mortgage Insurance Premiums (IRS rules change periodically on this deduction)
NOTE: Currently the qualifying debt limit for a first and second home is $750,000 ($375,000 if married filing separately). For existing mortgages, if the loan originated on or before December 15, 2017, taxpayers can continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes AND $100,000 of Home Equity Loan Interest (provided the funds were used to buy, build, or substantially improve the property securing the loan).
6-Charitable Contributions:
A-Cash, Check, Credit Card, Money Order donations & payroll deductions.
B-Noncash items
C-Mileage for charitable service (current amount allowed is $.14 cents per mile)
D-Special clothing/uniforms used for providing charitable services to a qualified charitable organization.
E-Out of pocket expenses for local transportation and travel away from home overnight
NOTE: Taxpayers must have written documentation, substantiation and proof of all donations and expenses incurred.
7-Gambling losses (allowed only to the extent of gambling winnings).
Again, the above itemized deductions each have specific rules that must be met for them to be allowed as a deduction.
Taxpayer's should keep accurate and complete records for each category to determine whether they will take the standard deduction or itemize their deductions each year.
TAX PLANNING TIP: Bunching various itemized deductions into a year to meet the amount necessary to itemize may be a way to put these deductions to use. This way your total allowed itemized deductions will be greater than your allowed standard deduction.
CALL NOW 561-746-1926 or 561-339-8102 if you have any questions or concerns or would like to schedule a FREE, Confidential, No-Obligation Tax-Saving Consultation.