Itemized Deductions

Itemized Deduction

A deduction from one's taxable income as the result of a specific expense the taxpayer has had over the course of the tax year. Most medical expenses, for example, may be deducted from one's taxable income. The same is the case for interest on mortgages and business expenses. The IRS allows itemized deductions as an alternative to the standard deduction, which takes a flat amount out of one's taxable income. Itemized deductions are subject to certain restrictions; for example, some expenses must exceed a certain percentage of the adjusted gross income to be deductible.

Itemized Deductions

Certain personal expenditures allowed by the tax Code as deductions from adjusted gross income. Examples are certain medical expenses, qualified interest on home mortgages, and charitable contributions. Itemized deductions are reported on Schedule A, Form 1040. A taxpayer who itemizes deductions may not claim the standard deduction.
References in periodicals archive ?
The TCJA raised the standard deduction and restricted itemized deductions, especially the one for state and local taxes (SALT).
* The taxpayers were unmarried individuals whose filing status was "single" and who itemized deductions on their federal income tax returns in lieu of using their 812,000 standard deduction.
New York was opposed to many of the changes in TCJA, and because of this they decided that they would not follow most of those changes, especially as it applied to itemized deductions.
Should the taxpayer decide to use the graduated rates, they still have to choose their mode of deduction, either itemized deductions or the optional standard deduction.
One key trend is that more people are taking the standard deduction, which has increased significantly, and fewer people are claiming itemized deductions, which have been restricted.
In addition to the five deductions discussed here (well, eight if you include the breakdown of major itemized deductions), there are a bunch of tax credits available, some of which, like the Child Tax Credit, have been significantly expanded.
Given the substantial increase in the standard deduction, it's quite possible that most taxpayers will elect it over itemized deductions. However, there may be opportunities to proactively "bunch" itemized deductions from two years into one year such that the total exceeds the standard deduction for appropriate clients.
Since taxpayers will use the greater of their standard deduction or their itemized deductions, fewer taxpayers will itemize.
Among the most common itemized deductions in America are deductions for state and local income taxes, mortgage interest, property taxes, and charitable donations.
One such example is the interaction between the alternative minimum tax (AMT) and the choice between itemized deductions and the standard deduction.
(1) What is your stance on President Obama's proposal to cap itemized deductions at 28 percent?