The itemized deductions are those eligible expenses which when claimed by an individual taxpayer on federal income tax return decreases their taxable income. In accordance with the new U.S. tax reforms, there is no longer an overall limitation on itemized deductions based on your adjusted gross income.
The major differences between the Standard Deductions and the Itemized deductions are as follows:
|Itemized Deduction||Standard Deduction|
|Non-resident aliens and the dual-status alien can claim for itemized deduction.||Non-resident aliens and the dual status alien cannot claim for standard deductions.|
|Determined by your expenses.||Determined by your filing status. Not based on expenses made during the year.|
|A fixed dollar amount is not deducted. Amount deducted depends on your expenses.||A fixed dollar amount is deducted.|
Government uses itemize deductions to help the taxpayers with the financial incentives so that the taxpayers can use the money saved for other purposes like buying a home or for donation purposes, etc. and claim the tax deduction on the return.
You are eligible for the itemized deduction if you fall under the following categories
You are not liable to claim for itemized deductions if you fall under the following
In order to determine whether you should itemize your deductions or not, you need to add up the sum of your total deductible expenses keeping in mind the limitations on each. The Taxpayer has the option of choosing either of the deductions- standard deductions or itemized deductions whichever is greater to get the advantage of more deductions on your taxable income.
You can file your income taxes for itemized deductions by using Form 1040 and thereby listing your itemized deductions on Schedule A.
If you choose to itemize deductions, you will have to produce accurate records related to the expenses made during the tax year to prove the following:
The eligible expenses which fall under the category of deductible itemized deductions are as follows:
State and Local Taxes
Home Mortgage Interest
Casualty and Theft Losses
Medical and Dental Expenses
Investment Interest Expenses
The miscellaneous itemized deductions are not deductible. They are as follows:
The phaseout limit of itemized deduction is removed.
There are various advantages of choosing itemized deductions. They are as follows:
As every coin has a double side, hence there are demerits too of the itemized deductions. They are as follows:
A. No, Cosmetic surgery is not deductible unless it is necessary to improve a deformity related to a congenital abnormality, an injury from an accident or trauma.
As per US Tax Law, the itemized deductions are the eligible expenses which can be claimed by taxpayers on a federal income tax return to lower down their taxable income. These expenses according to the new tax reform in the U.S includes charitable donations, medical expenses, state and local taxes, property tax, home mortgage interest, investment interest expenses as well as the gambling expenses. Hence to claim for the itemized deductions, the taxpayer can calculate the deductions, on Schedule A of Form 1040.