Schedule A is the primary form that’s used for deductions to taxable income as reported on IRS Form 1040. This important schedule allows the taxpayer to reduce their tax liability through certain deductions to income. This article looks at the various deductions for Schedule A of Form 1040. First it’s important that the taxpayer understands the meaning of deductions to taxable income.
Schedule A and Deductions to Taxable Income
The IRS allows for certain deductions in order to lower an individuals taxable income. After the deductions are calculated, they’re subtracted from the adjusted gross income on Form 1040, the U.S. Individual Tax Return. After the deductions are subtracted, personal exemptions are also subtracted to determine the actual taxable income.
Standard Deduction or Itemized Deductions for Schedule A
In order to take advantage of taxable adjustments using Schedule A, the total itemized deductions should be large than the standard deduction. Unless an individual can be claimed as a dependent, the standard deductions for the 2009 tax year are as follows.
- Single or Married filing separately $5,700
- Married filing jointly or qualified widow or widower $11,400
- Head of household $8,350
As an example if the total amount of itemized deductions for persons married filing jointly on Schedule A is $10,000, the standard deduction of $11,400 should be used. Using the standard deductions in this example would result in less tax liability for the taxpayer.
Allowable Itemized Deductions for Schedule A
There are seven basic categories for deductions to taxable income on Schedule A.
- Medical and Dental Expenses. Only the amount over 7.5% of adjusted gross income can be used as a deduction
- Taxes Paid. The taxpayer can deduct the greater amount between state and local income tax or general sales tax. Real estate tax and new motor vehicle taxes (registration fees) can also be deducted.
- Interest Paid. Interest and points paid on a home mortgage can be used as well a certain home insurance premiums and interest on investments. Interest paid on personal loans cannot be used.
- Gifts to Charity. Payments made to charitable organizations as well as tangible gifts can be deducted.
- Casualty and Theft Losses. There’s a host of losses that can be deducted. Use Form 4684 to calculate losses.
- Job Expenses and Certain Miscellaneous Deductions. If the taxpayer had out of pocket expenses related to their job, the amount over 2% of adjusted gross income can be used. Other expense like tax preparation fees can be listed in this section.
If expenses are related to a home-based business Schedule C can be used to determine deductions. Under certain business related usage, vehicle expense may also be used to lower tax liability.
It’s advisable to use a tax professional to determine taxable income. Certain online tax preparation services may also be a viable alternative for tax preparation services. For further information, visit the IRS website.
Source:
irs.gov
James Clausen - Clausen received a Bachelors Degree in Business Administration in Automotive Management and Marketing at Northwood University, graduating ...
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