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itemized deduction |
Also found in: Wikipedia | 0.04 sec. |
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Itemized Deduction A deduction from a taxpayer's taxable adjusted gross income that is made up of deductions for money spent on certain goods and services throughout the year. The specific deductions that are allowed are outlined by the IRS and include such expenses as mortgage interest, state and local taxes, gifts, and medical expenses. Notes: Usually, an itemized deduction is limited to a certain percentage of adjusted gross income. As an alternative to standard deduction, an itemized deduction requires taxpayers to keep track of each possible tax-reducing expense throughout the year.
Individuals who frequently spend large amounts on medical care, state and local taxes, donations, or other deductible expenses may be better off itemizing. However, tax law may set thresholds in spending that must be exceeded before the deductions can be made. For example, in the medical category, say only expenses that exceed 7.5% of your adjusted gross income may be deducted. If you didn't spend at least this much, then none of your medical expenses could be deducted. Itemized deduction Specific deductions allowed by the IRS outlined in the tax return.
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| Outside of the two-year window, the taxpayer must take a taxable distribution from the IRA and report the income; a donation is reported as an itemized deduction subject first to the charitable deduction limits, then to the itemized deduction phaseout. For claims in this category a litigant is subject to the ruling in Banks, which requires the total proceeds be included in income and the legal fees deducted as a miscellaneous itemized deduction under section 212 as an expense incurred to produce income. 170(b)(1)(A), an individual's annual itemized deduction for cash contributions to public charities cannot exceed 50 percent of the individual's contribution base (adjusted gross income, without any net operating loss carryback). |
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