In: Accounting
What is schedule A with reference to all of its parts? i.e. medical in excess of... taxes withholding ...
Schedule A is an optional attachment a tax payer can attach to form 1040. It enumerates itemised deductions from income. These deductions are an alternative to standard deductions and the taxpayer is given an option to apply for deductions with the option which will have bigger returns.
These itemised deductions are redued from Adjusted Gross Income (AGI) to calculate an individual's income for the year.
For tax years after 2017, many of the deductions are elminated, chnaged or have been limited
The deductions include:
1. Medical and Dental Expenses
These include the expenses you pay for medical expenses such as doctor's visits
For 2017, the medical expenses should not be more than 7.5% of the AGI and must not be reimbursed in any manner like an insurance payout.
The % has been reduced to 7.5% for 2017 and 2018. From 2019, the % is limited to 10% of the AGI.
2. State and Local Income Taxes or General Sales Taxes
Any income or state tax you pay to the government is deductible.
From 2018. there is a limit of $10,000 on this deduction including any tax paid on real estate and personal property.
3. Real Estate and Property Taxes
If certain conditions are met, real estate and property taxes are deductible.
From 2018, these would be limited to $10,000 including state and general sales tax mentioned above.
4. Mortgage Interest Paid
You can deduct interest paid on mortgage taken on 1st and 2nd home
Interest can be deducted upto :
a. on mortgage loans upto $ 1 million that is paid to bank or mortgage company on your 1st and 2nd home.
b. Home equity loan or line of credit up to $ 100,000
c. on loan taken from individual upto $1 million.
For mortgages taken after December 15, 2017 interest on the first $750,000 of mortgage is deductible.
Interest on Home Equity Loans used for other substantial improvement are no longer deductible.
5. Dedcutible Investment Interest
Any interest on borrowings for investment can be deducted as far as it does not exceed the amunt of investment
6. Chartitable Donations
Any contribution to qualified charitable organisations, csh or non cash, is deductible upto 50% of the AGI.
From 2018, the 5 has been increased to 60% of AGI.
7. Casualty and Theft Losses
Losses from Casualties such as fires, tornados and theft are deductible subject to certain limitations.
From 2018, these losses are limited to federally declared disaster areas.
8. Miscellaneous Itemised deductions
There are 2 categories in this: a. subject to a limit of 2% of AGI which include Unreimbursed employee business expenses, hobby losses and tax preparation fees.
b. Deductions not subject to limit : theses are deductions not listed in any of the above categories.
From 2018, miscellaneous dedcution subject to a limit of 2% of AGI and foreign real estate property taxes has been eliminated
For any tax payer claiming the above itemised deductions all supporting such as bills, receipts, invoics, stubs etc have to be maintained