Itemized Tax Deductions on Schedule A
You can make a deduction from your income by using either the standard deduction or itemized deductions. Not sure whether to itemize deductions or use the standard deduction? When you prepare and e-file your tax return on eFile.com, we will make this easy for you and you can be assured that the results are in your best interest based on the latest tax updates. If you have questions, you can always contact one of our Taxperts.
On this page:
- When you should itemize deductions depends on how many itemized deductions you can actually claim and if they are greater than you standard deduction when combined.
- Each deduction item has limits and criteria to be met in order to claim it on your return.
- eFile reports your itemized deductions on Schedule A, compares them to the standard deduction you are eligible for, and selects the option that benefits you the most so you do not have to make these calculations yourself.
In order to itemize deductions, your total deductions on Schedule A should allow for a greater deduction amount than the federal standard deduction. Generally, most taxpayers do not fall into this category as the standard deduction was increased greatly in 2018. When you prepare and e-file your taxes via the eFile Tax App, we will give you this option and will compare it with your standard deduction and calculate which is most beneficial to you - sign up free here.
1. Unreimbursed Medical and Dental Expenses
It might be beneficial for you to itemize your, your spouse's, and your dependents' unreimbursed (not covered by health insurance) medical and dental care expenses on Schedule A associated with Form 1040.
To find out how much you can deduct or itemize, add up your total medical and dental expenses for yourself, your spouse, and dependents for the year. You can only deduct the medical expense amount that exceeds 7.5% of your adjusted gross income (AGI).
Let's say your AGI is $40,000 and your medical expenses are $5,000. As a result, you could claim $2,000 on your tax return: $40,000 AGI * 7.5% = $3,000. Thus, $2,000 exceeds your $3,000 limit of your $5,000 medical expenses.
Line 1: Your total medical/dental expenses (not reimbursed or paid by others) are: $5,000
Line 2: Your AGI (Line 11 of Form 1040) is: $40,000
Line 3: 7.5% of your AGI is: $3,000
Subtract Line 3 from Line 1, and this is the amount you can deduct: $2,000
If Line 3 is greater than Line 1 you cannot deduct your medical/dental expenses. In the example above, you can deduct $2,000 of your expenses.
2. Long-term Care Insurance Premiums
Long term care or LTC premiums are different than medical expenses. These insurance premiums are deductible to the extent that the premiums exceed 10% of your adjusted gross income (AGI. There is a limit based on your age, and it must be for qualified long term care insurance. The total amount is added to your medical expense deduction and then combined on Schedule A.
3. Taxes You Paid
The taxes paid you can deduct are:
- State and local taxes or general sales tax - you may only deduct one or the other
- State and local real estate taxes and personal property taxes.
Deductions for state and local sales tax (SALT) or income and property taxes can be itemized on Schedule A. The total amount you are claiming for state and local sales, income, and property taxes cannot exceed $10,000. This means you can deduct up to $10,000 paid in local taxes, state taxes, and sales taxes paid during the year.
If you paid $3,210 in property taxes on your home residence, it would be to your advantage to deduct this amount if it is above your standard deduction when combined with your other itemized deductions.
Keep in mind that state, local, sales, and foreign property taxes deducted on Schedule C, Schedule E, or F do not have a limit. If an individual owned and rented a property, their property taxes are not capped.
4. Interest You Paid
Home mortgage interest is the interest you paid on debt taken out to buy, build, or improve your home. You can only deduct the interest you paid on your mortgage debt, not on the debt amount. The interest amount is reported to you on Form 1098 provided for the year by your mortgage company.
This includes home mortgage interest and points and you should include all amounts, whether or not a 1098 was issued. Deduct the payments and combine them with your other itemized deductions to maximize your tax savings.
A. For home mortgage debt taken out on or after December 15, 2017: Your home mortgage interest deduction is limited to the following debt amounts: $750,000 (Single, Married Filing Joint/Qualifying Widow/Widower, Head of Household) and $375,000 (Married Filing Separately).
B. For home mortgage debt taken out before December 15, 2017: Your home mortgage interest deduction is limited to the following debt amounts: $1,000,000 (Single, Married Filing Joint/Qualifying Widow/Widower, Head of Household) and $500,000 (Married Filing Separately).
As it stands now, for Tax Year 2026, the mortgage interest cap goes back to home mortgage interest paid on all mortgages $1,000,000 or lower.
If you sell your home, you can still exclude up to $250,000 from capital gains taxation ($500,000 if married filing jointly) if you owned and used the home as a primary residence for two of the past five years.
Home Mortgage Amount: $235,500
Annual Interest Rate: 4.1%
Annual Mortgage Interest Payment: $9,655.50
You can deduct the $9,655.50 mortgage interest you paid during the tax year.
One Important Change Regarding Home Equity Debt
Interest paid up to $100,000 in home equity debt taken to improve an existing home or to purchase a home is deductible on debts incurred on or before December 15, 2017. You could also use the debt to pay college tuition, credit card debt, or other non-home expenses. In effect, you could deduct interest on a $1.1 million mortgage/debt amount.
For home equity debts incurred after December 15, 2017, you cannot deduct interest on the debt on 2018-2025 Tax Returns unless it is used to buy, build, or improve your home that secures the debt. Your interest deduction is limited to the $750,000 (Married Filing Jointly) and $375,000 (Married Filing Separately) debt amounts. Debts incurred on or before December 15, 2017 are grandfathered into the old amounts listed above. Unless new legislation changes this, it will revert to its prior state for Tax Year 2026 and you will again be able to deduct interest on $1 million mortgage and $100,000 on home equity debt, regardless of when the mortgage was taken out.
The only other type of interest that is deductible is investment interest - Form 4952 is often included. This deduction is limited to your net investment income.
5. Charity Contributions
Cash or noncash donations to charity are deductible on your taxes. The gift must go directly to charity in cash rather than to a donor-advised fund or private foundation. You can also donate items to charity and deduct the fair market value of those items. For noncash items, eFile will help you complete Form 8283 if the value of your donated property exceeds $500, required by the IRS.
- Note: income tax return charity overstatements could result penalties equal to 50% of the tax underpayment resulting from the overstatement.
Your cash donation to a public charity cannot exceed 60% of your AGI or adjusted gross income in order to be deductible on your income tax return. Appreciated assets including long-term appreciated stocks or property is generally deductible at fair market value not to exceed 30% of your adjusted gross income.
For record keeping purposes, consider the following:
1. The public charity or private foundation is a non-profit, IRS registered 501(c)(3) organization.
2. Keep a record of the contribution (usually the tax receipt from the charity).
3. For non-cash donations, you might have to obtain a qualified appraisal to substantiate the value of the deduction you are claiming.
You made a cash contribution to a Private Charity for $1,110. If your AGI is $30,000, 30% of your AGI is $9,000, so you can deduct $1,110 of the charitable contribution.
If your donations exceed your AGI limitation, you can carryforward your donation into the next five years until it is all used up.
6. Casualty and Theft Losses
The itemized deduction for personal casualty and theft losses has been removed for Tax Years 2018 through 2025 with the exception of losses attributable to a federal disaster as declared by the President. If you have these losses to report, only losses in excess of 10% of your adjusted gross income (AGI are deductible.
Job Expenses and Other Miscellaneous Deductions
For Tax Years 2018-2025, job expenses and miscellaneous deductions limited to 2% of your Adjusted Gross Income or AGI are eliminated. These include expenses incurred on the job and are not reimbursed (e.g. tools, supplies, uniforms, dues and subscriptions, job search expenses, un-reimbursed travel mileage, home office deductions. In summary, deductions for un-reimbursed employee expenses and tax preparation expenses cannot be included on 2018-2025 Tax Returns.
Is there a Limit on Total Itemized Deductions?
There is no limit on itemized deductions for Tax Years 2018 through 2025, there is only certain limits per deduction based on your AGI as outlined in each section above.
Itemized or Standard Deduction?
You should only itemize deductions if your expenses add up to more than the standard deduction - eFile will figure this for you.
Below is a summary of the sample amounts listed above in comparison to the current standard deductions.
A single taxpayer is entitled to the standard deduction by default, but has the following expenses which qualify as itemized deductions:
1. Medical Expenses: $3,000
2. Taxes you paid, property taxes: $3,210
3. Mortgage Interest Payment: $9,655.50
4. Charity Contributions: $1,110
Total itemized deductions: $16,975.50.
$16,975.50 in itemized deductions compared to the standard deduction for single taxpayers is more beneficial.
As you can see, with the filing status single and married filing separately, you would be well advised to itemize your deductions. All other filing statuses would do better with the standard deduction.
Important Tax Tip! If you are not sure, the eFile Tax App will select the most tax advantageous option for you - standard or itemized - and you can see for yourself. If you still want to change it from one to the other and see the difference, you can change that manually.
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