Itemized Deductions

If your deductible personal and family expenses, as defined by the IRS, add up to more than the standard deduction for your filing status, and you have the records to prove them, you should itemize your deductions instead of claiming the standard deduction. To do that, you'll have to file Form 1040, and complete Schedule A and attach it to your tax return.

Tip As a general rule, most taxpayers who own their own homes will come out ahead by itemizing. Those who don't are unlikely to be able to itemize unless they have extraordinary amounts of medical expenses, charitable gifts, or casualty losses during the year.

In 2013, certain itemized deductions are limited (up to 80%) if adjusted gross income (AGI) exceeds $300,000 for joint filers, $150,000 for married filing separately, $275,000 for heads of households, or $250,000 for single filers. However, deductions for medical and dental expenses, investment interest expenses, casualty and theft losses of personal use property, casualty and theft losses of income-producing property, and gambling losses are not subject to this overall limit on itemized deductions.

Schedule A divides your itemized deductions into six major categories:

• medical and dental expenses
• state and local taxes
• interest
• gifts to charity
• casualty and theft losses
• miscellaneous deductions

Planning Tools You can download Schedule A, Schedule C and Schedule E to aid in your financial planning.

Interest. Two major categories of interest payments are deductible on Schedule A: qualified home mortgage interest, and investment interest.

Some other types of interest are deductible in other places on your tax return. Business-related interest payments are deducted on Schedule C, interest on rent-producing property is deductible on Schedule E, and qualified student loan interest is deductible on Line 33 of your Form 1040.