Deciding to File Schedule A
What are Deductions, Anyway?
Deductions are expenses you can subtract from your adjusted gross income when filing your federal income tax return. Deductions reduce your taxable income, which is the amount of money subject to taxation. Some deductions are available to all taxpayers whether you choose the standard deduction or choose to itemize your deductions, while others are only available if you itemize.
The IRS gives a standard deduction to all tax filers. Your filing status and age determine the dollar amount of your standard deduction.
These are the standard deductions in 2024 (filing in 2025).
These are the deductions you can take whether you use the standard deduction or itemize:
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Alimony payments
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Business use of your car
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Business use of your home
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Money you put in an IRA
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Money you put in a health savings account
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Penalties on early withdrawals from savings
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Student loan interest
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Teacher expenses
Be sure to keep accurate records of the above expenses throughout the year. Some will be reported to you in January of the following year; some will be your responsibility to tally or locate and report.
Does It Add Up?
Itemized deductions are the additional deductions you are allowed to claim to reduce your taxable income by reporting, or itemizing, them line by line on IRS tax form Schedule A.
Deciding whether to take the standard deduction or to itemize deductions isn’t rocket science. If the standard deduction is more than the sum of itemized deductions, take the standard deduction. If the standard deduction is less than the sum of your itemized deductions, itemize.
It’s not rocket science, but you still have to do math.
It All Adds Up.
These are the expenses you can itemize on Schedule A, Itemized Deductions.
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Bad debts
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Canceled debt on home
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Capital losses
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Donations to charity
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Gains from sale of your home
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Gambling losses
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Home mortgage interest
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Income, sales, real estate, and personal property taxes
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Losses from disasters and theft
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Medical and dental expenses over 7.5% of your adjusted gross income
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Miscellaneous itemized deductions
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Opportunity zone investment
Some of these will be reported to you by the appropriate agency or institution. For example, your mortgage company may send you a Form 1098 to report your home mortgage interest. Others, such as losses from disasters or theft, may be your responsibility to tally and report.
It is important to keep accurate records of your expenses throughout any given tax year. Knowing what deductions you can claim in advance will help you know what to keep and what to throw away.
Key Takeaways:
Take all the deductions you are entitled to in order to lower your taxable income. You could itemize your way into a lower tax bracket. File a Schedule A if the total on Schedule A is higher than the standard deduction allowed for your filing status and age.
