So let’s talk about Itemizing today.
When they said the TCJA was going to simplify the tax code, this is where they made that happen. There used to be a whole section on the schedule A for deductions subject to a 2% of income floor. Basically deductions that qualified as this deduction (unreimbursed employee expenses and whatnot) that exceeded 2% of your (M)AGI (can’t remember if it’s straight up AGI or Modified AGI for this one atm).
Let’s go through the Schedule A section by section and I’ll try to remember how these things work.
Medical and Dental Expenses
Medical and dental expenses used for health purposes, not cosmetic (sorry plastic surgery and botox don’t count) that exceed 7.5 of your AGI can go here. There is a medical mileage rate set at 20 cents so if you’re driving to the hospital frequently you may want to log the mileage you drive there. Do note, these expenses all have to be paid by you so while you may have health insurance, if it’s paid through work then it doesn’t count for the purposes of this section.
Taxes You Paid
So with taxes you paid you have a choice @Heimdallr. You can either choose to go with your state tax withholding on your w2, or general sales tax. Typically state income tax withholding is more unless you make a big purchase like a vehicle. You also get to include real estate taxes and personal property taxes (if your state has any). After adding the amount up you can take the lesser of that or $10,000.
Interest You Paid
Generally you only fill this section out if you own a home. In the case one does own a home they typically receive a form 1098 reporting the interest, principal, mortgage insurance, etc. You may have to fill out line 8b if you have the mortgage through a private party in which case you have to have their name, address, and ssn in addition to the interest you paid if you intend to claim it. You may also be able to claim some investment interest expenses which are limited to net investment income from property held for investment. That deduction is figured on a form 4952.
Gifts to Charity
Rule 1. You need to have a receipt. Without a receipt you can’t claim anything.
Any gifts have to be made to a qualified organization. That being: science, religious, charitable, educational, or literary in purpose. Also organizations which work to prevent cruelty to children or animals. Basically you can’t gift to Steve down the street unless he does the aforementioned things. Also if you get something in return you can’t deduct it. So if you go to an auction for charity you’re SOL.
This section is broken down into 2 main categories. Donations by check or cash, and donations other than by check or cash (i.e. goodwill/salvation army/school clothing drop boxes/etc.). There is an income limitation that they raised significantly so it’s like 40% or something ridiculous like that. In the event you go over $500 in donations other than by check or cash, you must also fill out form 8283. If you donated clothes and got a receipt but didn’t calculate the value of your donations you can obtain a form from salvation army or other similar organizations online that gives the typical range of value for various goods and then you just ballpark it based on that. Please do that before doing your taxes (especially if you’re taking it somewhere).
Casualty and Theft Losses
Has to be from a federally declared disaster area (basically just hurricanes for the most part). Fill out a form 4684 if this applies to you.
Other Itemized Deductions
These deductions are not subject to any AGI floor, however they are either extremely fringe and not worth discussing, or gambling expenses which are limited to the amount of your reported winnings. You either need to keep a huge box of scratch-offs, lotto tickets, or go to the casinos you frequent and obtain a win-loss statement.
That seems like a lot of work why would anyone want to itemize?
In doing your taxes you have a choice. You can either opt for the standard deduction for your filing status, or itemize your deductions. Standard deductions are up iirc 200 or 300 from last year’s amounts.
2018 standard deduction amounts are as follows:
- Single and MFS $12,000
- Head of Household $18,000
- MFJ and QW $24,000
ONLY ITEMIZE IF YOUR ITEMIZED DEDUCTIONS EXCEED THE STANDARD DEDUCTION otherwise you’re leaving money in the government’s pocket and not yours.
Because of the stupid cap on taxes you paid many people can’t itemize, or if they do it’s much less than what they’re accustomed to.