Making Itemized Deductions on 1040 Schedule A

Is It to Your Advantage to Itemize?

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Itemized deductions aren't for the faint of heart. They're a group of tax deductions you can list on Schedule A of Form 1040, and they require some work to pull together. You can claim either standard deduction for your filing status, or you can itemize your qualifying individual deductions ... line by line by line. In either case, the standard deduction or the total of your itemized deductions reduce the amount of income on which you have to pay federal income tax.

What Does Itemizing Deductions Mean?

Itemizing is just what it sounds like – it means reporting your actual expenses for various types of allowable deductions, totaling them up one by one. You must keep accurate track of what you spend during the year, along with supporting receipts and documentation to prove that these expenses are legitimate in case the Internal Revenue Service ever asks for proof. Documentation can include bank statements, check stubs, property tax statements, insurance and medical bills and acknowledgement letters for charities to which you may have donated. 

The Difference Between Itemized Deductions and the Standard Deduction

Itemizing your deductions versus claiming the standard deduction is an either/or choice. You can't do both, although you can change your decision from year to year. The standard deduction is a set amount based on a person's filing status: $6,300 for single taxpayers and those who are married but filing separate returns, $12,600 if you're married and filing jointly, and $9,300 for those who qualify as head of household as of the 2016 filing year.

The majority of taxpayers claim the standard deduction.

When You Might Want to Itemize Deductions

It's to a taxpayer's advantage to itemize when the total of all his individual deductions exceeds the standard deduction for his filing status. Otherwise, it would make no sense – you'd be paying taxes on more income than you have to.

For example, if you're a single filer and you had total itemized deductions of $6,500 in 2016, you'd be better off going to the trouble of itemizing because this subtracts $200 more off your income than the $6,300 standard deduction. ​But if you qualify as head of household, you'd end up paying taxes on an additional $2,800 if you itemized – the difference between $6,500 and the $9,300 standard deduction you'd be entitled to claim.

When a Taxpayer Must Itemize Deductions

Sometimes the decision to itemize or claim the standard deduction is out of your hands. Married couples who file separate tax returns must each use the same method. They must both take the standard deduction or they must both itemize, so if your spouse itemizes, you're stuck with doing so also.

Non-resident aliens must itemize. They're not eligible to take the standard deduction.

What Expenses Can Be Itemized?

​The list of qualifying deductions is fairly extensive, and limitations apply to some of them. Generally, you can claim itemized deductions in the following categories:

​​​Medical and dental expenses include the cost of insurance premiums as long as your employer doesn't reimburse you for them, as well as certain qualifying medical and dental care costs. But you can only deduct the portion that exceeds 10 percent of your adjusted gross income. If your AGI is $55,000 and you had $7,500 in qualifying medical expenses, your deduction would be limited to $2,000 – the amount that exceeds $5,500 or 10 percent of your AGI. But if you're age 65 or older, this threshold drops to 7.5 percent as of the 2016 tax year.

​Miscellaneous ​deductions are subject to a 2-percent threshold that works the same way.

Other Limitations on Itemized Deductions

Itemized deductions are also limited when a taxpayer's AGI exceeds certain limits based on his filing status. These limits are sometimes called Pease limitations because Representative Donald Pease authored the legislation that provides for them back in 1990.

For 2016, Itemized Deductions Start to Phase Out Once AGI Reaches
Filing StatusAdjusted Gross Income Threshold
Married filing jointly and qualifying widow(er)$311,300
Married filing separately$155,650
Head of household$285,350
Single$259,400

The total amount of the itemized deductions you can claim is reduced if your AGI exceeds the limit for your filing status. The reduction is either 3 percent of the amount by which your AGI exceeds the threshold or 80 percent of your total itemized deductions, whichever is less. You don't have to include deductions claimed for medical expenses, investment interest, casualty or theft losses or gambling losses when calculating 80 percent of the total.

You can calculate the limitation on itemized deductions using the "Itemized Deductions Worksheet – Line 29" found on page A-13 of the Instructions for Schedule A.