Guide to IRS Schedule A (Form 1040): Itemized Deductions
When filing your federal income tax return, claiming deductions can lower your total tax bill or boost your refund. You can choose either the standard deduction or itemized deductions—whichever offers the greater tax benefit. While the higher deduction is usually the better choice, there are exceptions. In some cases, such as when the Alternative Minimum Tax (AMT) applies, choosing the lower deduction may be more beneficial.
This guide covers IRS Schedule A, which you must use if you choose to itemize deductions. By assessing your expenses carefully, you can decide whether itemizing is the right choice for your situation.
Key Takeaways
- Itemizing with Schedule A (Form 1040) can potentially lower your taxable income more than the standard deduction if you have sufficient deductible expenses.
- Review each category (taxes paid, mortgage interest, medical costs, etc.) to see if your total deductible expenses exceed the standard deduction for your filing status.
- The SALT deduction limit caps the amount of state and local taxes you can claim at $10,000 ($5,000 if married filing separately). This limit will likely change or be removed entirely starting in 2026.
- Good record keeping is essential: maintain documentation to validate every expense claimed.
Standard Deduction vs. Itemized Deductions
Standard Deduction
The standard deduction is a fixed dollar amount that lowers the income on which you owe taxes. This amount varies by filing status (single, married filing jointly, etc.) and factors such as age or blindness. Many taxpayers choose the standard deduction due to its simplicity.
Itemized Deductions
Itemized deductions allow you to list certain qualifying expenses. If the total of these expenses exceeds the standard deduction for your filing status, you will likely save more money by itemizing. To do so, you must complete and attach Schedule A (Form 1040) to your tax return.
Who Should Consider Itemizing?
You may benefit from itemizing if:
- The total of all your deductible expenses (such as mortgage interest, charitable contributions, and certain taxes) is greater than the standard deduction for your filing status.
- You are legally required to itemize because you do not qualify for the standard deduction (for instance, nonresident aliens generally cannot claim the standard deduction).
Common itemized deductions include:
- State and local income or sales taxes, real property taxes, and personal property taxes (limited to a combined total of $10,000 or $5,000 if you are married filing separately).
- Mortgage interest (up to the allowed limit), home equity loan interest (if funds were used to buy, build, or substantially improve your home), and investment interest.
- Medical and dental expenses above 7.5% of your adjusted gross income (AGI).
- Charitable contributions made to qualified organizations.
- Certain casualty and theft losses related to federally declared disasters.
Categories of Itemized Deductions on Schedule A
Below is a closer look at the major categories that appear on Schedule A:
1. Medical and Dental Expenses
You can deduct unreimbursed medical and dental costs that exceed 7.5% of your AGI. Examples include:
- Payments to doctors, dentists, surgeons, and other medical practitioners.
- Prescription medications, medical supplies, and certain long-term care services.
- Health insurance premiums you pay out of pocket (if not covered or reimbursed by your employer).
AGI, or Adjusted Gross Income, is your total income minus all deductions except the standard deduction or itemized deduction. As an example of how the medical deduction works, let’s say your AGI is $100,000. The first 7.5% of your medical expenses cannot be itemized, or $7,500 in this example. If you have medical expenses of $7,500 or less, you cannot itemize any medical expenses. If you have medical expenses of $7,501, then $1 can be itemized. If you have medical expenses of $7,502, then $2 can be itemized, etc.
2. Taxes You Paid
This category includes specific state and local income, and property taxes. You can deduct:
- State and Local Income or Sales Taxes: You have the option to deduct either state/local income tax or state/local general sales tax, but not both.
- Real Estate Taxes: Property taxes you paid on real estate you own.
- Personal Property Taxes: Taxes based on the value of personal property (e.g., vehicle registration fees, if calculated by vehicle value which is common in certain states such as California).
The combined deduction for state and local taxes is capped at $10,000 ($5,000 if married filing separately).
3. Interest You Paid
Deductions in this category include:
- Home Mortgage Interest: Interest paid on loans used to buy, build, or improve your home. Some limitations apply, particularly if your mortgage balance surpasses certain thresholds.
- Investment Interest: Interest from loans taken out to purchase taxable investments, limited by your net investment income.
4. Gifts to Charity
Charitable contributions to qualified organizations are deductible up to certain limits. There are two broad categories:
- Cash Contributions: Monetary gifts made by cash, check, or credit card.
- Non-Cash Contributions: Donations of property, such as clothing or vehicles. The value of donated property often requires an appraisal if it’s above a specific amount.
5. Casualty and Theft Losses
You may deduct losses from federally declared disasters if you meet specific requirements. This typically involves reducing your loss by any insurance reimbursement and adhering to other IRS guidelines.
6. Other Itemized Deductions
Items that appear here include:
- Gambling losses (up to the amount of your gambling winnings).
- Certain unrecovered investments in pensions.
- Other less common deductions are outlined in the Schedule A instructions.
How to Complete Schedule A
- Gather Documentation: Collect receipts, bills, 1098 forms for mortgage interest, state and local tax statements, and any other records proving your deductible expenses.
- Fill Out Each Section: Accurately enter your qualifying amounts on the corresponding lines of Schedule A.
- Calculate Totals: Add these deductions and note any category-specific limits (like the $10,000 cap on state and local taxes).
- Compare to the Standard Deduction: If the total is higher than the standard deduction for your filing status, itemizing should yield greater tax savings.
For detailed guidance, see the IRS Instructions for Schedule A, which explains each deduction category and its limits.
Making the Right Deduction Choice—With Support from Greenback
Determining whether to itemize can significantly impact your federal income tax outcome.
Evaluating the specifics of your tax situation—such as mortgage interest, charitable contributions, and medical expenses—is the best way to decide whether itemized deductions will outdo the standard deduction. Although it is almost always best to claim the higher of the two deductions, there are circumstances that this may actually not be the best choice.
When in doubt, consult a tax professional or certified public accountant to ensure you’re making the best choice for your financial circumstances.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.
