Standard Versus Itemized Deductions

There are several deductions that you can itemize.  Here are the big ones, along with their limits:

Medical and dental expenses.  You can deduct medical and dental expenses if they exceed 7.5% of your adjusted gross income (AGI).  So if an individual earned 100,000, only those expenses over $7,000 would be deductible.  

State and local income, property, and sales tax.  
These are deductible up to $10,000.  There is no deduction for foreign real property taxes.  

Mortgage interest paid.  Interest on a mortgage used to buy a house is deductible with limits.  For debt incurred after December 15, 2017, the total allowable debt is $750,000; for debt incurred before December 16, 2017, the total allowable debt is $1,000,000.  If your mortgage exceeds these limits, you will not deduct all of the interest you pay. 

Charitable contributions.  An individual’s charitable cash contributions are limited to 100% (2021) of AGI.  You can carry over any amount over the limit for up to five years.  There is an exception for payments to higher education institutions in exchange for the right to purchase tickets or seating at athletic events – these are NOT deductible.  You don’t need receipts for donations under $250; for contributions over $250, you do. 

Casualty and theft losses.  A personal casualty or theft loss is deductible if the loss is attributed to a federally declared disaster.

Gambling losses. Gambling losses (cost of non-winning bingo, lottery, and raffle tickets, for example) are deductible only if you are also claiming gambling income. 

Other itemizable deductions include: 

• Amortizable premiums on taxable bonds. 
• Casualty and theft losses from an income-producing property. 
• Federal estate tax on income in respect of descendent.
• Impairment-related work expenses for persons with disabilities. 
• Losses from Ponzi type (pyramid type) investment schemes. 
• Repayments of more than $3,000 under a claim of right. 
• Specific unrecovered investments in a pension. 

Expenses not Deductible as Itemized Deductions

Several expenses have been deductible in the past or may seem like they should be deductible but are not.  These include (though this is not an exhaustive list): 

• Unreimbursed employee business expenses. 
• Tax preparation fees. 
• Legal and accounting fees. 
• Clerical help and office rent. 
• Custodial (for example, trust account) fees. 
• Investment expenses of a regulated investment company. 
• Deduction for repayment under a claim of right if $3,000 or less. 
• Investment expenses. 
• Safe-deposit box fees. 
• Political contributions.
• Legal expenses for personal matters.
• Lost or misplaced cash. 
• Expenses for meals during work hours. 
• The cost of entertaining friends. 
• Commuting expenses. 
• Travel expenses for employment away from home.
• Travel as a form of education. 
• Expenses of attending a seminar, convention, or similar meeting. 
• Club dues
• Fines and penalties. 
• Expenses of producing tax-exempt income. 

While these are not deductible personal expenses, many of them may be deductible as business expenses.  So, if you incur these expenses as a part of a business venture, you may want to structure your activities so that you can reduce your business income before it becomes personal income.  

We can help you sort this out.  

If you are confused about whether to claim the standard deduction or itemized deductions, we can help; this is, after all, what we do!