What Is Schedule A Used For? A Form for Itemized Deductions
Understand when itemizing deductions with Schedule A is a better financial choice than taking the standard deduction and what's involved in the process.
IRS Form 1040, Schedule A, is a tax form used by individuals to report itemized deductions. These deductions lower a taxpayer’s adjusted gross income, potentially reducing their overall tax liability. Filing Schedule A is an alternative to taking the standard deduction, which is a fixed dollar amount taxpayers can subtract from their income. The choice to itemize depends on whether the total of a person’s deductible expenses is greater than the standard deduction for their filing status.
Deciding Between Standard and Itemized Deductions
A taxpayer should calculate their total itemized deductions and compare that figure to the standard deduction amount. If the itemized total is higher, filing Schedule A is advantageous. For the 2024 tax year, the standard deduction amounts are $29,200 for Married Filing Jointly, $14,600 for Single and Married Filing Separately, and $21,900 for Head of Household filers.
For example, a single individual with $16,000 in eligible expenses would benefit from itemizing because this total is greater than the $14,600 standard deduction. If their total deductions were only $12,000, they would be better off taking the standard deduction.
Categories of Itemized Deductions
Medical and Dental Expenses
Taxpayers can deduct unreimbursed medical and dental costs for themselves, their spouse, and their dependents. This deduction is limited to the amount of expenses that exceeds 7.5% of their Adjusted Gross Income (AGI), which is found on Form 1040. Qualifying expenses include payments for doctor visits, hospital care, prescription medications, and dental treatments.
For instance, if a taxpayer has an AGI of $60,000, their threshold is $4,500. If they incurred $6,000 in eligible medical expenses, they could only deduct $1,500. Health insurance premiums paid with after-tax dollars and transportation costs for medical care, at a rate of 21 cents per mile for 2024, can be included.
State and Local Taxes (SALT)
The deduction for state and local taxes (SALT) includes payments for either state and local income taxes or general sales taxes, but not both. The deduction can also include state and local real estate and personal property taxes.
The total amount claimed for all state and local taxes combined is capped at $10,000 per household per year. For those who are married and filing separately, this limit is $5,000 per person. This cap applies to the combined total of income (or sales), real estate, and personal property taxes.
Home Mortgage Interest
Homeowners can deduct interest paid on a mortgage used to buy, build, or substantially improve a primary or second home. The deduction is limited to the interest on up to $750,000 of mortgage debt ($375,000 if married filing separately). Your lender reports the amount of interest paid on Form 1098.
Interest on a home equity loan or line of credit (HELOC) is also deductible, but only if the funds were used to buy, build, or improve the home securing the loan. If the proceeds are used for other personal expenses, like paying off credit card debt, the interest is not deductible.
Gifts to Charity
Voluntary contributions made to qualified charitable organizations are deductible. Both cash and non-cash donations are eligible, provided there is no expectation of receiving anything of substantial value in return. Qualified organizations include those with religious, educational, or scientific purposes.
Deductions are limited based on the taxpayer’s AGI. For cash contributions, the deduction is limited to 60% of AGI. For non-cash property, the limits are 30% or 50% of AGI, depending on the property and organization. Contributions exceeding these limits can be carried forward for up to five years.
Casualty and Theft Losses
A personal casualty or theft loss is only deductible if it occurred in a federally declared disaster area. Losses from events like a common house fire or theft are not deductible unless the location is part of a federal disaster declaration.
To calculate the deduction, subtract any insurance reimbursement from the loss amount. Then, reduce that figure by $100 per event. The total of all casualty losses for the year is only deductible to the extent that it exceeds 10% of the taxpayer’s AGI.
Other Itemized Deductions
This category allows for a few other deductions, most commonly for gambling losses. A taxpayer can deduct gambling losses only up to the amount of their gambling winnings, which are reported as income on Schedule 1 of Form 1040. Other deductions in this category include casualty and theft losses of income-producing property and certain impairment-related work expenses for persons with disabilities.
Information and Documentation Needed to Complete Schedule A
To accurately complete Schedule A, taxpayers must gather specific documents and information throughout the year to substantiate their claimed deductions.
Medical and Dental Expenses
- Receipts from doctors, dentists, hospitals, and pharmacies for prescription medications.
- Proof of payment for health insurance premiums that were not paid with pre-tax dollars.
- Detailed mileage logs for any travel to and from medical appointments.
State and Local Taxes
- Records of state and local income taxes paid, which can be found on W-2 forms or estimated tax payment records.
- Receipts from major purchases, such as a vehicle, if choosing to deduct sales tax instead of income tax.
- Statements from local tax assessors detailing property taxes paid.
Home Mortgage Interest
- Form 1098, Mortgage Interest Statement, which is sent by the lender each year.
Charitable Contributions
- A bank record, canceled check, or a written acknowledgment from the charity for any cash donations.
- A receipt from the organization for non-cash donations, and for items valued over $500, a more detailed record of how the value was determined.
How to Complete and File Schedule A
The process of completing Schedule A involves transferring your calculated totals for each deduction category to the correct lines on the form. Some categories require calculations on the form itself, such as determining the deductible portion of medical expenses after applying the AGI limitation.
After filling in all applicable lines, the amounts are added together to find the total itemized deductions on line 17. This final total is then transferred to the designated line on Form 1040 to calculate your taxable income. Schedule A must be attached to your Form 1040 when you file your annual tax return.