The Internal Revenue Service offers every taxpayer the option to itemize their deductions or to claim the standard deduction. The standard deduction amount varies depending on your filing status. However, if you have significant deductible expenses during the year, the total of which is greater than your standard deduction, you can itemize by reporting the expenses on Schedule A.
The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.
Purpose of Schedule A
Schedule A is required in any year you choose to itemize your deductions. The schedule has seven categories of expenses: medical and dental expenses, taxes, interest, gifts to charity, casualty and theft losses, job expenses and certain miscellaneous expenses. Each of these categories has different requirements and limitations on the amount you can deduct.
Preparing the Schedule A
When you prepare the Schedule A, you do not have to complete every line or include expenses in each category; just those that you are eligible to claim. Although many taxpayers have deductions for each category, having just one deductible expense may be sufficient to justify itemizing. For example, the mortgage interest deduction alone can be quite significant and by itself, be greater than the standard deduction. When you are done filling out the schedule and applying the specific limitations, you then transfer your total deduction to Form 1040.
When you use TurboTax, we’ll ask simple questions about your deductions and fill out the Schedule A for you.
Comparison to the standard deduction
Using Schedule A to itemize your deductions allows you to claim a number of personal expenses; however, it may not make financial sense to do so since you give up the standard deduction. In 2017 for example, the standard deduction for a single taxpayer is $6,350. If you have $1,000 in charitable donations and pay $2,000 of mortgage interest during the year, your itemized deductions are only $3,000. In this case, you can save more in income taxes by claiming the standard deduction instead of itemizing.
Schedule A tips
Keeping accurate and detailed financial records of your expenses during the year can reduce the amount of time you spend preparing the Schedule A and may also be helpful when evaluating the deductibility of each expense. Some itemized deductions, such as property and sales taxes, are often overlooked. For example, not only can you deduct property taxes on your home, but also on the boats and mobile homes you own.
In addition, if you don't pay state income taxes, then you have the option of claiming a deduction for all state sales tax you pay. For purposes of calculating your sales tax deduction, retaining receipts for all purchases you make during the year is imperative to maximizing your tax savings.
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