What Can I Itemize On My Taxes

Credit For The Elderly Or The Disabled

Individuals who are at least 65 years old at the end of 2021 can qualify for a credit worth between $3,750 and $7,500. You can also qualify if youre under 65 but receive disability benefits. There are income limits, which range from $12,500 to $25,000 based on your filing status. Claim this credit by using Schedule R.

Home Equity Loan Interest

A home equity loan is essentially a second mortgage on your house. With a home equity loan, you can access the equity youve built in your home as collateral to borrow funds that you need for other purposes.

Like regular mortgage interest, you can deduct the interest youve paid on home equity loans and home equity lines of credit. However, you can only make this deduction if you used the borrowed funds to pay for a home improvement. Prior to the Tax Cuts and Jobs Act of 2017, you could deduct the interest on these loans regardless of how you spent the funds.

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Examples Of Commonly Used Un

Your deduction can include virtually any expense that you have as an employee that fits these three requirements and was not reimbursed by your employer. Expenses that end up falling into this category typically include:

• Business use of your vehicle
• Travel expenses for business
• Medical examinations required by your employer
• Union dues and expenses
• Work clothing and uniforms

There are other expenses that may qualify as an employee expense as well. If you purchased an item or otherwise spent funds for your job, you may have a deductible expense. Just be sure that it meets the three criteria listed earlier.

It is important to note not all of these expenses are fully deductible. Meals, for example, can only be deducted by 50 percent of the total cost. Part of the reason for this is that the IRS assumes that you were going to eat anyway, regardless of whether you were engaged in business activities at the time. However, the agency does allow a partial deduction because when you eat for business, you are likely spending more money than you would be if you had the option to eat at home. Business use of your vehicle is another example that is only partially deductible.

Looking for more? You can find more information on other popular IRS deductions in the following articles:

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How To Choose Whether To Itemize Or Take The Standard Deduction

Every year it’s up to you to decide whether you should itemize or take the standard deduction. However, as a result of the Tax Cuts and Jobs Act , the tax reform law that took effect in 2018, far fewer Americans will need to itemize than in the past. Today, only about 11% of all taxpayers itemize, compared with 30% before 2018.

Summary Of Tax Law Changes

If youâre filing as a single taxpayer for the 2021 tax yearâor youâre married and filing separatelyâyou will likely be better off taking the standard deduction of $12,550 if your itemized deductions total less than that amount.

The same applies to a married couple filing jointly who have no more than $25,100 in itemized deductions and heads of household whose deductions total no more than $18,800 .

These deductions almost doubled starting in 2018 after the passage of the TCJA.

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Credit For Prior Year Minimum Tax

If you paid alternative minimum tax in a previous year but dont have to pay it this year, you may be able to claim a credit this year to get back some of the AMT you paid. This credit only applies to AMT you paid because of deferral items such as depreciation or incentive stock options that you exercised but didnt sell. This credit can also be claimed by individuals, estates, or trusts. Learn more in the instructions for Form 8801.

What If Im Missing A Receipt Should I Still Enter My Deduction

This is coming from a fellow taxpayer not a CPA but its probably not worth it. You dont wanna mess with tax law thats how the IRS got Al Capone.

If you submit a deduction without an electronic record on standby to back it up, an audit could result in the IRS disallowing the deduction and fining you.

If your estimated itemized deductions are close to the standard deduction but youre missing lots of receipts and records its probably better to just take the standard deduction this year and keep better records next year.

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Ask For Professional Help If Youre Unsure

As a final point, although the Tax Cuts and Jobs Act did simply the U.S. tax code, thereâs still quite a bit of grey area and potentially confusing tax topics. For example, does a computer cart in the corner of your dining room qualify for the home office deduction? Can you pay some of your 2021 mortgage interest in 2020 in order to maximize that deduction?

The answer to both of these questions is âmaybeâ and thatâs the point. If youâre unsure about your ability to take any of these tax deductions, itâs a smart idea to seek the help of a qualified and experienced tax professional to be sure youâre doing it right.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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Disadvantages Of Itemized Deductions

• You have to understand the rules. Some itemized deductions come with a few hurdles, of course. If you have medical expenses, for example, you can only deduct the portion that exceeds 7.5% of your adjusted gross income.

• You might have to spend more time on your tax return. If you itemize, youll need to set aside extra time when preparing your returns to fill out the big enchilada of tax forms: the Form 1040 and Schedule A, as well as the supporting schedules that feed into those forms.

• You need proof. You need to be able to substantiate your deductions. That means keeping records and being organized. If you normally take the standard deduction and are thinking of itemizing when preparing your return next year, start saving your receipts and other proof for your deductions now.

Nc Standard Deduction Or Nc Itemized Deductions

You may deduct from federal adjusted gross income either the N.C. standard deduction or N.C. itemized deductions. In most cases, your state income tax will be less if you take the larger of your N.C. itemized deductions or your N.C. standard deduction. On Line 11 of Form D-400, enter either the N.C. standard deduction or N.C. itemized deductions, whichever is applicable. Make sure you fill in the correct circle to indicate which deduction you are claiming. Fill in one circle only.

Important: DO NOT enter the amount of your federal standard deduction or your federal itemized deductions on Line 11. The N.C. standard deduction and the N.C. itemized deductions are not identical to the federal amounts and are subject to certain North Carolina limitations. In addition, there is no additional N.C. standard deduction amount for taxpayers who are age 65 or older or blind.

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Examples Of Allowable Itemized Deductions

Allowable deductions include:

• Medical expenses, only to the extent that the expenses exceed 10% of the taxpayerâs Adjusted gross income . . Allowable medical expenses include:
• Capital expenditures that are advised by a physician, where the facility is used primarily by the patient alone and the expense is reasonable
• Payments to doctors, dentists, surgeons, chiropractors, psychologists, counselors, physical therapists, osteopaths, podiatrists, home health care nurses, cost of care for chronic cognitive impairment
• Premiums for medical insurance
• Cosmetic surgery

Do I Need To Send Receipts With My Itemized Tax Deduction

The IRS may ask you to submit additional forms or records for certain deductions, like Form 1098 from your mortgage lender to deduct your mortgage interest.

But generally speaking, you dont have to submit sales receipts to the IRS. You are required, however, to keep electronic records of everything you deduct receipts, bills, etc. since the IRS may come asking for them.

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Who Should Itemize Deductions In 2022 And Beyond

To decide whether itemizing is worth it, you will need to do some math. Add up all the expenses you wish to itemize. If the value of expenses that you can deduct is more than the standard deduction then you should consider itemizing.

Another big consideration is that itemizing will require a bit more work. Itemizing requires you to keep receipts throughout the year. You also need to keep those receipts after you file just in case of an audit. On the other hand, if you take the standard deduction, there is no extra math and you dont need to keep any receipts.

For most people, there is a balance between the work required to itemize and the amount you save by itemizing. For example, lets say you want to itemize. You add up all your expenses and find that you would save $500 by itemizing. Its probably worth doing a little extra work to get $500. What if you add up your expenses and see that itemizing would only save you $100? That $100 may still be worth it for some, but for others, it may just be easier to take the standard deduction and not worry about keeping track of your receipts.

Advantages Of Taking The Standard Deduction

Here are some big reasons people take the standard deduction instead of itemizing on their tax returns.

• It’s faster. Taking the standard deduction makes the tax-prep process relatively quick and easy, which probably is one reason most taxpayers take the standard deduction instead of itemizing.

• It usually gets bigger every year. Congress sets the amount of the standard deduction, and its typically adjusted every year for inflation.

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What Are Itemized Deductions

Itemized deductions are essentially a list of expenses you can use to reduce your taxable income on your federal tax return. They include medical expenses, taxes, the interest you pay on your home mortgage, and donations to charity. Taxpayers who itemize add up all of their deductible expenses and subtract the total from their adjusted gross income to reach their taxable income.

When you file your federal income tax with Form 1040, U.S. Individual Tax Return, you have the option of itemizing deductions or taking the standard deductionâan amount predetermined by the IRS, based on your filing status.

Typically, if your total itemized deductions are greater than the standard deduction available for your filing status, youâll opt to itemize.

However, itâs important to note that there are a couple of circumstances in which taxpayers donât have a choice on whether to itemize or claim the standard deduction. Nonresident aliens are required to itemize and married couples who file separately have to choose the same methodâone canât itemize while the other claims the standard deduction.

Some common itemized tax deductions include:

• Medical and dental expenses
• Gifts by cash or check
• Casualty and theft losses from a federally declared disaster

Assuming you can itemize, to do so youâll need to keep track of what you spent during the tax year and keep documentation, such as receipts, bank statements, medical bills, and acknowledgment letters from charities.

Home Mortgage Interest Expenses

As a homeowner, if you took out a mortgage to buy a home, you can claim the interest youve paid on that loan as an itemized deduction. The Form 1098 that your mortgage lender sends you records the amount of your deductible interest and points from payments youve made each year. If youve bought or refinanced your mortgage during the tax year, you can also claim the points youve paid as deductibles following certain guidelines.

The mortgage interest deductible is allowed up to the first $750,000 borrowed for a mortgage and applicable for two residences for each taxpayer. Before the enactment of the TCJA, the deduction allowed was on the first $1,000,000 of mortgage debt. However, this higher limit still applies if you refinance the debt, and the amount stays the same.

Any home equity loan interest or line of credit interest youve paid on a home equity debt also qualifies as a deduction, as long as the loan was used to buy, build, or improve the home that was used as collateral.

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Types Of Itemized Tax Deductions

The Internal Revenue Service determines what qualifies as an itemized deduction and the IRS may also cap how much of your expenses you can claim.

There are several qualified expenses that you can itemize, but you must be able to show records for the expenses you are claiming as deductions.

Seven of the Most Common Itemized Tax Deductions

There are other, less common tax deductions such as personal property tax deductions or sales tax on certain qualified purchases. Moving and business related expenses may qualify for deductions in certain cases.

You should also check with your state tax agency to find out what state or local tax deductions you may qualify for when filing your state income tax return.

A tax professional or tax preparation software can help you find these less common deductions.

The Mortgage Interest Deduction

If you have a mortgage, the mortgage interest deduction may allow you to deduct your interest, including your private mortgage insurance payments. You need to itemize to claim this deduction. Many people no longer qualify to itemize after the 2017 tax reform but if you do, meaning your total itemized deductions are worth more than your standard deduction, itemizing can potentially save you a lot.

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Can I Take A Fair Market Value Deduction For Donating Private S

Yes, it’s possible to deduct the full fair market value of the contribution if the recipient organization is a public charity. But tactically, the answer depends on whether the charity is able to accept private stock as a gift. Most charitable organizations simply dont have the resources, expertise or appetite to efficiently accept and liquidate these types of assets, particularly in a time crunch at the end of the year.

However, Fidelity Charitable has a team of in-house specialists who work with donors and their advisors to facilitate charitable donations of S-corp and private C-corp stock every day . Once you make a donation to Fidelity Charitable and the asset is sold, youre able to recommend grants to your favorite charities, quickly and easily.

And by donating private stock, you generally do not pay capital gains taxes on Fidelity Charitable’s subsequent sale of the stock. There’s a second tax benefit as well: you’ll generally be able to deduct the full FMV as determined by a qualified appraisal.

What Is A Tax Deduction And How Does It Work

A tax deduction lets you subtract certain expenses from your income before you file taxes. You are then taxed on this lower amount of income instead of the amount you actually earned.

The government allows deductions for expenses that are seen as benefiting the economy or the common good. For instance, tax deductions may encourage people to buy homes or to save money by subtracting some of those expenses from your taxable income.

The benefit for you is that tax deductions can save you money when it comes to paying your personal taxes.

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Mortgage And Home Equity Loan Interest

Tax reform affects mortgage interest deduction amounts.

For mortgages taken out after December 15, 2017, only interest on the first $750,000 of mortgage debt is deductible. For older mortgages, the $1 million limitation still applies.

Additionally, interest on home equity loans, used for purposes other than substantial improvements to your home, will no longer be deductible.

Internet And Phone Costs

Cellphone costs may be deducted for the portion used for business. If you are using your phone or internet for both personal and work use, make sure to deduct only the portion of the phone or internet used for work.

For example, if you use your phone for work only 50% of the time, you can deduct half of your phone-bill costs. A basic home phone or residential phone line cannot be deducted, but a second phone line at home used for business can be deducted.

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