Itemized Deductions

Line 40 is a significant line item for most taxpayers – whether a taxpayer chooses to claim the standard deduction or to itemize his/her deductions, Line 40 often provides the largest tax deduction of any Form 1040 line item. As a result, taxpayers must be aware of the benefits of each option and know which factors to consider in selecting a deduction method. Generally speaking, one’s federal income tax will be less by taking the larger of the standard deduction or total itemized deductions.

In lieu of claiming the standard deduction, taxpayers are able to itemize certain deductions by completing Schedule A. These deductions apply to expenses associated with the following tax-privileged items:

-Medical, dental, prescription drugs, and other health care costs
-State and local income taxes or state and local sales taxes
-Real estate (property) taxes
-Personal property taxes (such as motor vehicle registration fees)
-Interest paid on a home mortgage
-Interest paid on investments (such as margin interest)
-Cash contributions to charities and churches
-The fair market value of non-cash contributions to charities and churches
-Personal losses because of theft or casualty
-Job-related expenses that your employer did not reimburse you for
-Union dues
-Cost of purchasing or cleaning uniforms
-Job-related education and professional development
-Job-related travel
-Home office expenses
-Tax preparation fees
-Investment fees and expenses (such as IRA custodial fees and annual brokerage fees)
-Safe deposit box fees
-Gambling losses (only to the extent of gambling winnings)

For detailed instructions regarding each type of deduction, including possible dollar limitations of each, please consult the Instructions for Schedule A.

NOTE FOR 2013 RETURNS: Under some circumstances, the total value of itemized deductions may be limited. For example, taxpayers who are either high-earning or claim significant itemized deductions may be unable to fully claim all of their potential itemized deductions. For more information regarding these 2013 changes to itemizing, please click here.

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