Frequently Asked Questions on Itemized Deductions
Should I Itemize?
Additional Standard Deduction
You are also allowed additional standard deductions of $1,150 for a single taxpayer ($900 if married filing separately, or $900 per spouse if filing jointly) if:
Who must itemize?
Even if your itemized deductions add up to less than the standard deduction, you must itemize your deductions if:
You can deduct six kinds of itemized expenses:
You can deduct only certain amounts of some types of itemized deductions. The amount you can deduct varies, depending on the type of itemized deduction.
Our tax software figures these limits for you and reduces your deductions where appropriate.
Most of the limits are figured using some percentage of your adjusted gross income (AGI).
Your actual deduction will be calculated by taking your total expense for that type of deduction, and then subtracting the appropriate percentage of your AGI.
For example, your miscellaneous itemized deductions must be greater than 2% of your adjusted gross income before you get a tax benefit for any of those expenses. So if your adjusted gross income is $100,000, your miscellaneous deductions must total more than $2,000 before you get a tax benefit for your expenses.
This type of percentage limit is called a floor, because you have to come up to the floor before you can start deducting any of the expenses.
What are the limits on each kind of itemized deduction?
Here are some of the expenses you can deduct and their limitations:
Medical & Dental Expenses
There are many items you can deduct as medical expenses. You can deduct any expense you pay for the prevention, diagnosis, or medical treatment of physical or mental illness, and any amounts you pay to treat or modify any structure or function of the body for health (but not for cosmetic purposes). You can also deduct the cost of transportation to the locations where you can receive this kind of medical care, your health insurance premiums, and your costs for prescription drugs and insulin.
Your medical expenses must equal at least 7.5% of your adjusted gross income before you can start taking the deduction. The medical expenses needed to meet the 7.5% floor don't give you any tax benefit. You get to deduct the medical and dental expenses above that floor.
Example: Emma's adjusted gross income was $100,000, and she spent $8,000 on medical expenses, because her expenses equaled at least 7.5% of her adjusted gross income, she can take the deduction for the amount above $7500. Her deduction, then, is for $500.
You can deduct the interest you pay on the mortgages for both your primary residence and one other residence.
Deduct your charitable contributions in the year you make them. For most contributions, the maximum you can deduct in one year is 50% of your adjusted gross income, but there are certain types of contributions that have a limit of 20% or 30% of your adjusted gross income. Of course, these percentages go way beyond what most people contribute to charity.
If your contributions go over the limit, you can carry the unused deduction forward to the next tax year. However, be sure to enter all of your contributions on this year's return, or the IRS will not know why you are claiming a carryover deduction next year.
Casualty & Theft Losses
For most personal casualties and thefts, deduct the loss in the year it happened. If you have a loss in a federally declared disaster area, you may be able to deduct the loss in another year.
The total of your casualty and theft losses must be more than 10% of your adjusted gross income (AGI), plus $100, before you will receive a tax benefit.
Miscellaneous deductions are usually unreimbursed employee expenses or business and investment expenses.
The total of your miscellaneous deductions must be more than 2% of your adjusted gross income before you can start deducting anything. (The floor on miscellaneous deductions is 2% of your adjusted gross income).
Example: Imagine that your adjusted gross income is $10,000, so 2% of $10,000 is $200. This means that to meet the 2% floor, you must have at least $200 in miscellaneous expenses.
However, only the amount over the $200 actually reduces your taxable income.
Now let's say that you have $500 in miscellaneous expenses. The first $200 meets the 2% floor limit, leaving you with $300 that you can deduct from your taxable income.
There are some miscellaneous deductions that are not subject to the 2% limit. They include gambling losses (up to the amount of your winnings) and casualty (or, theft) losses of income-producing property
Is there some limit on the total of all itemized deductions (applied after the limits)?
If your adjusted gross income is over certain amounts, your total allowable itemized deductions may be reduced even more.
If you face this problem, tax software figures the required reduction for you.
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