Itemized deductions are listed on IRS Schedule A.
When preparing federal income taxes each year there are many ways to reduce the amount of tax liability. The Internal Revenue Service (IRS) allows for a number of itemized deductions to reduce owed taxes that may apply to those people who can get more benefit from itemizing than from taking the standard deduction available to them.
Medical and Dental Expenses
If a taxpayer has excessive medical or dental expenses over the course of the year, they may be deductible from the income taxed for the year. The expenses are deductible only if the total medical and dental bills for the tax year exceed 7.5 percent of the taxpayer's adjusted gross income (AGI). For example, if a person's AGI is $100,000, then only those expenses over $7,500 will be deductible.
Home Mortgage
There are a couple of ways to reduce taxes based on your home mortgage. If a new house is purchased and the acquisition cost is less than $1 million, then the points charged paid to obtain the mortgage on the property and any prepaid interest may be deductible.
In addition, all interest paid on a home mortgage throughout the year may be deductible as well. This deduction is possible if the interest is paid on a loan secured by the qualified primary residence of the taxpayer or their second home.
Casualty and Theft
When damage or theft affects the home, household items or vehicles, the homeowner may be able to deduct the loss from federal income taxes. The loss is only deductible if the losses were not covered by insurance.
These losses do not include the normal depreciation of items or gradual damage done by insects or other culprits. The damage must come from a sudden and unexpected source such as a fire, earthquake, flood, vandalism, robbery or other disaster of that nature in order to qualify for the deduction.
Business Use of Home and Car
Taxpayers may be able to claim a deduction for the use of the home or automobile for business purposes if they are employed by another person or company. In order to qualify for the home office deduction, the expenses must not be reimbursed by the employer and the employee must be required by their employer to work at home. The percentage of the home used for employer's business will determine the amount of the real estate taxes, mortgage interest, rent, utilities, insurance and repairs that may be deducted.
Taxpayers may also be able to deduct the use of their car for business purposes as well. If the vehicle is used exclusively for business and not reimbursed by the employer, then a complete deduction can be made for either the standard IRS mileage rate or the business portion of actual expenses including gasoline, oil, repairs, tires, insurance, registration fees, licenses and depreciation.
Charitable Contributions
Charitable contributions made to IRS qualified charitable organizations are an itemized deduction on IRS Schedule A. Contributions over $250 must have a receipt from the charity acknowledging the donation. Noncash contributions are also allowed for items in good or excellent condition donated to the Salvation Army, Goodwill Industries or similar organizations. Noncash contributions should have an itemized list describing the goods donated, their condition, date of donation and acknowledgement by the charity.
