DEDUCTIONS
 
 Itemized Deduction
 
Who should itemize?
 
You should itemize deductions if your total deductions are more than the standard deduction amount. Also, you should itemize if you do not qualify for the standard deduction.

You should first figure your itemized deductions and compare that amount to your standard deduction to make sure you are using the method that gives you the greater benefit.
 
What is itemizing and how is it beneficial to me?
 
You may benefit from itemizing your deductions on Schedule A (Form 140) if:-
  1. You do not qualify for the standard deduction, or the amount you can claim is limited.
  2. Had large uninsured medical and dental expenses during the year.
  3. Paid interest and taxes on your home.
  4. Had large un-reimbursed employee business expenses or other miscellaneous deductions.
  5. Had large uninsured casualty or theft losses.
  6. Made large contributions to qualified charities. Or
  7. Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled.
 
Can I change my deduction method after filing?  
 
If your mind is changing means if you do not itemize your deductions and later find that you should have itemized or if you itemize your deductions and later find you should not have you can change your return by filing Form 1040x, Amended U.S. Individual Income Tax Return.
 
What happens, if itemized deduction is lower than Standard deduction? 
 
Even if your itemized deductions are less than the amount of your standard deduction, you can elect to itemized deductions on your federal return rather than take the standard deduction. You may want to do this, for example, if the tax benefit of being able to itemize your deductions on your state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. To make this election, you must check the box on line 29 of Schedule A.
 
Can I take a tax write off for itemized deductions on my tax return?
 
You deduct itemized deductions by listing on Form 1040, Schedule A all tax
deductible amounts you paid during the tax year for certain items such as medical and dental expenses, state income tax, local income tax, real estate tax, state personal property tax, local personal property tax,  home mortgage interest, and gifts to charity. These are called itemized deductions.


The standard deduction is a fixed dollar amount that reduces the amount of taxable income on which you pay tax. The amount of the basic standard deduction depends upon your filing status on your tax return. However, if you can be claimed as a dependent on someone else’s tax return, your standard deduction amount may be different. In some cases, the standard deduction can consist of two parts, the basic standard deduction, and an additional standard deduction amount for age, blindness, or both.

If a person is born or dies before the end of his or her tax year, the tax year is considered to cover a 12-month period

When you complete Form 1040, Schedule A you total the tax deductible amount spent on itemized deductions and compare the total with your standard deduction. The larger of the two tax deductions, standard deduction or itemized deduction, will be the tax deduction to choose on your tax return, since it will lower the amount of federal income tax you will lower or increase the amount of tax refund you will receive.
 
Can I take a tax deduction for child support payments on my tax return?
  No, you cannot deduct child support payments on your tax return. Child support payments are neither taxable to the recipient on the recipient's tax return, nor tax deductible by the payer on the payer's tax return. Additionally, any alimony payments that include an element of child support are not tax deductible on your tax return as to the child support element.
If tax deductible alimony payments include an element of child support and partial payments are made the payments must be credited first to the non tax deductible child support.
 
Itemized Deductions - Types of Itemized Deductions
 
Itemized Deductions - Casualty and Theft losses
  Usually you can only deduct on your tax return a casualty loss - one with a sudden, unexpected or unusual cause - in the tax year it occurs. And you're allowed to claim only the amount of the loss that exceeds 10% of your AGI after subtracting $100 for each casualty on your tax return
 
Itemized Deductions - Charitable Contributions
  Normally, you can claim your full charitable contribution on Form 1040, Schedule A. If you got something back in exchange for your charitable contribution, however, you can deduct only the excess value of your gift on your tax return.

If you gave a charity appreciated stock last tax year, you get a double tax break. Not only do you avoid owing tax on the capital gain, you can generally deduct the current market value of the shares on your tax return. A reminder: If you made a non cash charitable contribution last tax year of more than $5,000 - say, you donated a painting - you'll need a written appraisal of its fair market value, and the appraiser must sign the Form 8283 that you attach to your Form 1040. You may be able to write off the appraiser's fee as a miscellaneous itemized deduction on your tax return.
 
Itemized Deductions - Interest
  Interest is an amount you pay for the use of borrowed money. To deduct interest you paid on a debt on your tax return you must be legally liable for the debt and you must be able to use itemized deductions.
 
Itemized Deductions - Miscellaneous itemized deductions
  There are many Miscellaneous itemized deductions.
 
Can I take a tax deduction for a home office on my tax return?
 

You've got two ways to show the IRS that your home office qualifies for tax deductions on your tax return. You must show on your tax return that you use your home office exclusively and regularly as:

  • your "principal place of business"; or
  • the place where you meet with patients, clients, or customers in the normal course of business.
 
Home Office Tax Deduction - Principal Place of Business
  In order for your home office to qualify as your principal place of business you must spend most of your working hours in your home office and most of your taxable business income must come from activities in your home office. That's been harder to prove since the Supreme Court tightened this tax definition in 1993. To meet this tax test now, you must be able to show the IRS that your home office is your most important place of doing business or that you spend more time working in your home office than anywhere else. So make sure you have tax records of your activities at your home office and a log of the time you spent working at your home office as opposed to your employer's office.

If your home office was in a structure not attached to your home, such as a stand-alone garage, chances are you can take the tax deduction on your tax return with ease if you satisfy the exclusive use tax test and regular basis tax test discussed earlier. A detached structure does not have to qualify as a principal place of business or a place for meeting patients, clients, or customers.
 
Home Office Tax Deduction - What's tax deductible?
 

You can deduct on your tax return real estate tax, mortgage interest, utilities, operating expenses, and depreciation. You cannot deduct on your tax return the total that you incur for all of the above expenses. You must allocate the expenses to business and personal use on your tax return. Use one of the two (2) following methods:

  • If all of the rooms are not equal size divide the number of square feet used for home office space by the number of total square feet of your home. Apply the resulting percentage to your tax deductible expenses on your tax return. (i.e. 100 sq. ft. used for a home office divided by 1000 sq. ft. total size of home equals .10 or 10%. Apply 10% to the total of each tax deductible expense on your tax return.);

  • If all the rooms are the same size you may base your home office tax deduction on a comparison of the rooms used for home office space versus the total number of rooms. (i.e. Your home has 10 rooms and 2 rooms are used for your home office. You can deduct 20% of your total expenses on your tax return.)
 
Home Office Tax Deduction - Tax Deduction Limits
 

Your tax deductions on your tax return for utilities, maintenance, and insurance costs, depreciation, or rent, may not exceed the net income derived from your home office after mortgage interest, real estate tax, and casualty losses are subtracted. If you have no income for the tax year no tax deduction is allowed on your tax return. You may carry forward to future tax years any tax deductible expenses disallowed in the current tax year.
 
Home Office Tax Deduction - Sideline Businesses
 

If you have a principal occupation and also have a sideline business the expenses of the sideline business is tax deductible on your tax return if the above tax tests are met.
Use Form 8829 to figure your tax deductions on your tax return.