filed under: Taxes, Tax Deduction
If the amount of your allowable deductions is greater than your standard deduction, the IRS encourages you to itemize your deductions.
If you don't qualify for the standard deduction, you have no choice but to itemize. Itemizing your deductions requires you to complete Schedule A of IRS Form 1040.
Your itemized deductions begin to phase out at higher incomes. This rule for losing your itemized deductions is sometimes referred to as the "phase out" rule.
For 2009, you begin to lose some of your itemized deductions when adjusted gross income (AGI) reaches $166,800. (For married taxpayers filing a separate return, the income phase out amount is $83,400.)
Your itemized deductions phase out at the rate of 3% of additional income. In other words, for each $1,000 of adjusted gross income above the phase out limits, you lose $30 of itemized deductions. You can never lose more than 80% of your itemized deductions.
To calculate your itemized deductions, see the instructions to Form 1040.
Some major categories for itemizing deductions include:
Home mortgage interest expense. You may generally deduct the mortgage interest you pay on your residential mortgage for up to $1 million in home-acquisition debt and $100,000 in home equity debt. See IRS Pub. 936 for more information.
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Private mortgage insurance (PMI). For 2007 through 2010, you may deduct private mortgage insurance for mortgages acquired in 2007 or after. This deduction is available in full for those with adjusted gross incomes under $100,000. Above $100,000, the deduction begins to phase out and it is not available at all for those with adjusted gross incomes over $109,000
Real estate taxes. Property taxes that you pay on your home may also be itemized. See IRS Pub. 530 for more information.
State income tax. State income tax that you pay either through withholding from your paycheck or that you pay directly to the state may be used as an itemized deduction.
Medical and dental expenses. You may deduct qualified medical and dental expenses that exceed 7.5% of your adjusted gross income. See IRS Pub. 502 for more information.
Contributions to charitable organizations. The IRS allows you to deduct contributions of money or property to a qualified organization for its use. See IRS Pub. 526 for more information on the types of qualified organizations and charitable contributions.
Miscellaneous expenses. Miscellaneous expenses are generally unreimbursed expenses that are related to your performance of a job such as travel, lodging and meals. Certain types of miscellaneous expenses can only be deducted for amounts that exceed 2% of your adjusted gross income. See IRS Pub. 529 for more information.
2008-07-21 17:03:57

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