If you determine that itemizing deductions is right for you, that's where Schedule A comes in.
Itemizing deductions is an option open to anybody who pays taxes, although many people decide to take the standard deduction instead.
Why would you choose Schedule A? It can reduce your tax bill and ensure your maximum refund. Most taxpayers itemize to get a better tax outcome than they'd get with the standard deduction.
Schedule A For Itemized Deductions
When it comes to preparing and filing your tax return, getting the most money back is likely your priority. A way to do this is to lower your taxable income by claiming itemized deductions.
For many people, taking a standard deduction is actually better than itemizing. If you don't own a home and you’re not claiming any major, often unexpected, expenses, a standard deduction will usually get you the bigger return.
However, itemized deductions make sense if the total amount you're deducting exceeds the amount of your standard deduction. In other words, did your qualified expenses exceed your standard deduction?
We dive into the details of claiming itemized deductions here. If you determine that itemizing is right for you, that's where Schedule A comes in.
Choosing Schedule A: What To Expect
Schedule A has seven categories of expenses:
- Medical and Dental Expenses
- Taxes Paid
- Unreimbursed Job Expenses and Certain Miscellaneous Deductions
- Interest Paid
- Gifts to Charity
- Casualty and Theft Losses
- Other Miscellaneous.
Each of these categories has different requirements and limitations on the amount you can deduct. For every dollar that your itemized deductions exceed your standard deduction, you could save 10 to 39.6 cents in taxes. The amount you save depends on your tax bracket.
Some amounts you input on your Schedule A itemized deductions fall under the category listed as “other miscellaneous deductions.” An example of this type of expense would be gambling losses (not to exceed gambling income).
Documentation is everything when it comes to tax returns, especially if you plan to itemize. Why? You have proof:
- that you paid the expenses,
- that you paid the expenses during the year you're itemizing, and
- that the expenses were deductible.
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