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One of the taxpayers’ basic rights is to pay no more than the correct amount of tax they owe. And among the instruments meant to reduce the amount of money you owe in taxes are deductions. Most taxpayers claim the standard deduction when they file their federal tax return.
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The standard deduction is a set amount of money that individuals can automatically subtract from their adjusted gross income. It’s not taxed and the exact amount usually changes from year to year. For taxpayers who don’t itemize, the standard deduction for 2017 depends on their filing status, as follows:
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Single — $6,350 |
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Married Filing Jointly — $12,700 |
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Head of Household — $9,350 |
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Married Filing Separately — $6,350 |
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Qualifying Widow(er) — $12,700 |
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If a taxpayer is 65 or older, or blind, the standard deduction is more, but may be limited if another person claims that taxpayer as a dependent.
You cannot use the standard deduction if:
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You are married and filing a separate return, and your spouse itemizes deductions; |
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You are a nonresident alien or a dual-status alien during the year; or |
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You are filing a tax return for a period of less than |
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Standard deductions are not an option for estate or trust funds and partnerships.
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You can choose to use itemized deductions, rather than the standard deduction, if by itemizing you have less taxable income and, therefore, a lower tax liability.
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In a nutshell, you may benefit from itemizing your deductions on Schedule A (Form 1040) if you:
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Paid interest and taxes on your home, |
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Had large uninsured casualty or theft losses, |
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Made large contributions to qualified charities, or |
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Had large uninsured medical and dental expenses during the year, |
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Do not qualify for the standard deduction, or the amount you can claim is limited, |
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Had large unreimbursed employee business expenses or other miscellaneous deductions, |
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Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled.
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In order to claim itemized deductions, you must file your income taxes using Form 1040 and list your itemized deductions on Schedule A. You cannot file your taxes using Forms 1040A or 1040EZ if you want to itemize your deductions; only the standard deduction can be taken on these shorter forms.
When deciding whether to itemize, you need to remember that you will be giving up the standard deduction. Therefore, after adding up your itemized deductions, you need to make sure the total is greater than the standard deduction for your filing status.
Below you can find some important information especially for your 2017 tax returns.
Limit on itemized deductions. You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than $156,900 if married filing separately; $261,500 if single; $287,650 if head of household; or $313,800 if married filing jointly or qualifying widow(er).
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Mortgage insurance premiums. The deduction for mortgage insurance premiums has been extended through 2017. You can claim the deduction on Line 13 for amounts that were paid or accrued in 2017.
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Prepaid 2018 real estate and personal property taxes. If your 2018 state and local real estate or personal property taxes were assessed and paid in 2017, you may be able to include the prepaid amount on Line 6 or Line 7 of your 2017 Schedule A.
Medical expense deduction. You can deduct only the part of your medical and dental expenses that exceeds 7.5% of the amount of your adjusted gross income on Form 1040, line 38.
You may include in your medical expenses: insurance premiums paid for medical care or qualified long-term care insurance, fees paid to doctors and dentists, hospital services, treatments, drugs that require a prescription (except for insulin), false teeth, eyeglasses, hearing aids, transportation costs and so on. You can find extensive lists of deductible medical expenses online. |
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Your total medical expenses for the year must be reduced by any reimbursements you received personally or that was paid directly to the doctor or hospital.
Don't forget to include insurance premiums you paid for medical and dental care. Be careful, if you claimed the self-employed health insurance deduction on Form 1040, line 29, reduce the premiums by the amount on line 29.
Standard mileage rates for 2017. The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is reduced to 17 cents a mile. The business standard mileage rate is reduced to 53.5 cents a mile. The 2017 rate for use of your vehicle to do volunteer work for certain charitable organizations remains at 14 cents a mile. |
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You may also deduct investment interest (limited to your net investment income) but you cannot deduct personal interest (like interest paid on a loan to purchase a car or credit card or installment interest incurred for personal expenses).
You can deduct contributions or gifts you gave to organizations that are religious, charitable, educational, scientific, or literary in purpose. You can also deduct what you gave to organizations that work to prevent cruelty to children or animals. Certain whaling captains may be able to deduct expenses paid in 2017 for Native Alaskan subsistence bowhead whale hunting activities.
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Casualty and theft losses may also be deducted to the extent that they exceed 10% of your AGI and $100 per event.
You may deduct gambling losses to the extent of your gambling income.
A wide range of miscellaneous expenses are also deductible on Schedule A, but only to the extent that they exceed 2% of your AGI. Because of this 2% floor, it is important to distinguish miscellaneous itemized deductions from other itemized deductions.
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Miscellaneous itemized deductions may include:
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Job-related expenses, like tools, equipment, uniforms; |
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Unreimbursed work-related expenses, such as travel, education, or business use of your car; |
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Expenses related to the business use of home, if part of your home is used regularly and exclusively as your principal place of business, where you meet and deal with patients, clients, customers in connection with your trade or business; |
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Unreimbursed business entertainment and gifts expenses, of which generally only 50% is allowed as a deduction;
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Union dues; |
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Subscriptions to newspapers or other periodicals directly related to your job; |
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Fees you paid to tax preparers, or to purchase books and/or software used to calculate and prepare your taxes;
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| Itemized deductions are also limited when a taxpayer's AGI exceeds certain limits based on his filing status. For 2017, itemized deductions start to phase out when AGI reaches $313,800 for married filing jointly, $287,650 for head of household, and $261,500 for singles. |
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If you decide to itemize your deductions, make sure you keep all records required to substantiate your deductions.
Even better, make sure you ask for help from a tax professional so that you deduct every item you’re entitled to and is appropriate for your specific family situation.
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