What Are Itemized Deductions?

Many people use online tax preparation services before fully understanding itemized deductions. As a consequence, they pay more taxes than they need to.

To prevent this from happening to you, Taxpert wants to educate you as much as possible before you do your own taxes.

Q. Should I itemize?

A. Yes, if the total of your itemizations is more than your standard deduction.

You can either itemize (and deduct) your actual expenses or take the standard deduction. Choose the one that benefits you the most. But you can't do both.

If you decide to itemize, you must complete Schedule A and attach it to your 1040 return.

Q. What is the standard deduction?

A. The standard deduction depends on your marital status. Please click on the following link for a detailed explanation:

Standard vs. Itemized Deductions

Q. Who must itemize?

A. Even if your itemized deductions add up to less than the standard deduction, you must itemize your deductions if:

* You are married filing separately and your spouse itemizes.
* You are a U.S. citizen who can exclude income from U.S. possessions.
* You are a nonresident or dual-status alien.
* You file a short-period return because of a change in your accounting period.

Q. What types of itemized deductions can I take?

A. You can deduct many kinds of expenses, of which the following six are most common:

* Medical and dental expenses
* Taxes
* Interest expense
* Charitable contributions
* Casualty and theft losses
* Job expenses and other miscellaneous expenses

Please click on the following link for a detailed explanation of each:

Learn About Specific Itemized Deduction Before You Try OnLine Tax Preparation

Q. Are there any limits to the amounts I can deduct?

A. You can deduct only certain amounts of some types of deductions. The amount you can deduct varies, depending on its type.

Most of the limits are figured using some percentage of your adjusted gross income (AGI). This limit is called a floor.

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, or floor.

For example, your miscellaneous 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. You can only deduct what exceeds $2,000.

Q. Is there an another overall reduction in deductions in addition to the limits related to floors)?

A. Yes! If your adjusted gross income is over certain amounts, your total allowable deductions can be reduced even more.

Certain deductions are reduced by 3% of the excess of adjusted gross income over certain limits. This is called a phaseout.