Schedule A is the form you complete when you want to itemize your deductions. It is a listing of all the possible ways the IRS allows you to deduct amounts that you’ve spent through the year from your tax bill. For example, if you’ve paid for your health insurance out of your own pocket and not from a flexible spending account, you can deduct the amount you’ve paid out. There are many other deductions that you can take on Schedule A as well, including charitable donations.
If you haven’t yet decided whether to take the standard deduction or to itemize, it all comes down to a simple decision—which one will save you more on your taxes. Consider that for 2006, the standard deduction is $10,300 on joint returns, $5,150 for singles and $7,550 for heads of household. If you own a home, have deductible medical expenses, or gave a significant amount to charity you will probably be better off by itemizing your deductions. If your itemization adds up to more than the standard deduction for your filing status, deduct the itemized amount and save more on your taxes. If you’re not sure, it makes sense to itemize your deductions anyway so that you can evaluate both.
You itemize deductions using IRS Schedule A, which also means that you must file Form 1040. Schedule A has a few sections, each designed for a different type of deduction. Schedule A includes the following sections:
Medical expenses are things such as the following:
Prescription medicines
Doctor’s visits
Medical examinations
Nursing help
Hospital care
The supplemental part of Medicare insurance
Smoking cessation programs
Certain weight-loss programs
Medical treatment for drug or alcohol addiction
Medical aids such as eye glasses, contact lenses, hearing aids, braces, crutches, wheelchairs, and guide dogs, including the cost of maintaining them.
Surgery to improve defective vision
Certain lodging expenses while away from home to receive medical care
Ambulance service and other travel costs
You can deduct only the part of your medical and dental expenses that exceeds 7.5% of your adjusted gross income.
For more information on medical and dental expenses, see IRS Publication 502.
The IRS lets you deduct some of the taxes that you’ve paid, including:
Income taxes that you’ve paid to state and local governments
Real estate taxes that you’ve paid to state, local, and foreign governments
Personal property taxes
Other taxes
You can deduct interest you paid for the following:
Home mortgage interest that is reported to you on a Form 1098
Home mortgage interest that is not reported to you on a Form 1098; for example, if you paid interest to the person selling you the home
The points you pay when you close on a loan that are not reported on a Form 1098; for example, if you refinance or if you take out a home equity loan and pay points
Investment interest expense
Gifts to charity are donations or gifts that you gave to qualified 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.
You may be able to deduct part or all of each loss caused by theft, vandalism, fire, storm, or similar causes. You may also be able to deduct money you had in a financial institution but lost because of the insolvency or bankruptcy of the institution. You should complete Form 4684 to figure the amount of your loss.
You can deduct ordinary and necessary job expenses you paid that you were not reimbursed for. Ordinary expenses are those that are common and accepted in your field of trade, business, or profession. Necessary expenses are those that are helpful and appropriate for your business. An expense does not have to be required to be considered necessary. Some examples of these expenses follow, but there are others:
Safety equipment, small tools, and supplies needed for your job
Uniforms required by your employer that are not suitable for ordinary wear
Protective clothing required in your work, such as hard hats, safety shoes, and glasses
Dues to professional organizations and chambers of commerce
Subscriptions to professional journals
Fees to employment agencies and other costs to look for a new job in your present occupation, even if you do not get a new job
For more information on the types of expenses that you can deduct in this section, refer to IRS Publication 529.
You can find more information on Schedule A in the Form 1040, Schedule A Instructions.