DEFINITION of 'Schedule A'

Schedule A is a U.S. income tax form that is used by taxpayers to report itemized deductions, which can help reduce an individual's federal tax liability

BREAKING DOWN 'Schedule A'

The Schedule A form is attached as an optional supplement to the standard 1040 form for U.S. taxpayers paying annual income taxes. Itemized deductions serve as an alternative to claiming a standard deduction for tax returns, and the individual taxpayer can apply for deductions with whichever option will elicit the biggest returns. Like the standard tax returns, itemized deductions are subtracted from the adjusted gross income (AGI) to arrive at an individual's taxable income. Schedule A forms allow taxpayers to itemize taxes within seven designated categories:

  • Medical and Dental Expenses
  • Taxes You Paid
  • Interest You Paid
  • Gifts to Charity
  • Casualty and Theft Losses
  • Job Expenses and Certain Miscellaneous Deductions
  • Other Miscellaneous Deductions

The Schedule A also comes with detailed instructions explaining which of your expenses are deductible and where you should list them on the form.  

Most taxpayers do not itemize their deductions, electing instead to file at the standard deduction rate in which the taxpayer simply subtracts the standard deductions for their filing status to reach their AGI. For most taxpayers, it doesn't help the bottom line to personally itemize their potentially deductible expenses, and it saves them the trouble of keeping track of every possible deductible expense over the course of a year.

If you do choose to itemize your deductions, make sure to have documentation of your deductible payments: receipts, invoices, check stubs, etc. Furthermore, the standard deduction rate cannot be adjusted once an individual's tax returns have been filed, unless a taxpayer's filing status changes. Itemized deductions, however are subject to adjustment by the Internal Revenue Service (IRS), so applying with the standard deduction rate is predictable.

Generally speaking, individuals on higher tax brackets have more to gain from itemizing their deductions. For example, many people list interest on a mortgage payment as a large deductible in the "interest you paid" section. Obviously, a wealthier homeowner will have paid more interest on their home than a poorer one.

For many taxpayers, mortgage interest is a good benchmark for deciding whether or not to use the standard deduction. If your annual mortgage interest (which should be made available to you by your bank) is higher than the standard deduction rate (which in 2014 was $6,200), it is already to your advantage to itemize deductions into of filing for the standard deduction for your tax bracket.  

Gifts to charity, another deductible expense, are also more likely to occur amongst individuals in higher income brackets. However, many potential deductible expenses – like medical payments, unreimbursed income sustained as an employee, or uninsured asset loss due to theft or destruction – are unpredictable, and each taxpayer should decide how to calculate their tax deductions on a yearly basis.

RELATED TERMS
  1. Tax Deduction

    A deduction from gross income that arises due to various types ...
  2. Standard Deduction

    A base amount of income that is not subject to tax and that can ...
  3. Itemized Deduction

    A deduction from a taxpayer's taxable adjusted gross income that ...
  4. Above The Line Deduction

    Above the line deductions are certain types of deductions that ...
  5. Deductible

    1. The amount you have to pay out-of-pocket for expenses before ...
  6. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
Related Articles
  1. Taxes

    An Overview Of Itemized Deductions

    Not taking the standard deduction this year could save you hundreds of dollars.
  2. Taxes

    Calculating the Mortgage Interest Tax Deduction

    The amount of money you save by paying your mortgage off quickly will far exceed any benefit from the mortgage interest tax deduction.
  3. Taxes

    Why You Should Itemize Your Tax Deductions

    This strategy of moving your tax deductable payments and donations to the following year could mean hundreds more on your return.
  4. Taxes

    Increase Your Tax Refund With Above-The-Line Deductions

    Find out about these deductions and how you can use them to lower your tax bill.
  5. Taxes

    The Most Overlooked Tax Deductions

    The receipts you cram into your wallet could be replaced with cash come tax season.
  6. Taxes

    Top Tax Tips to Deduct Investment Management Fees

    Investment expenses can be deducted by those who meet three main criteria. Here's what they are and how they work.
  7. Financial Advisor

    How to Deduct Medical Insurance Premiums

    An overview of tax breaks for those who pay medical insurance premiums.
  8. Taxes

    Top Tax Deductions For Brokers

    If you are paying out of pocket, you can make your business expenses work for you at tax time.
  9. Retirement

    Top Tax Tips For Retirees

    Filing your taxes during retirement can be just as time consuming as when you were employed. We have some tips to help you out.
  10. Taxes

    Calculating The Mortgage Interest Tax Deduction

    While the mortgage interest tax deduction is a cherished American tax break, it’s perhaps the most misunderstood aspect of homeownership.
RELATED FAQS
  1. How do I know whether to itemize deductions or take the standard deduction?

    Taking the standard deduction is the easiest and most common method chosen by filers, but many taxpayers may wind up paying ... Read Answer >>
  2. Which is better for tax deductions, itemization or a standard deduction?

    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ... Read Answer >>
  3. How is the deductible I paid for my insurance claim treated for tax purposes?

    Find out how your health insurance deductible is treated for tax purposes and under what conditions you may be able to deduct ... Read Answer >>
  4. What are the deductions taken to determine AGI (adjusted gross income)?

    Read more about the deductions taken to arrive at adjusted gross income, or AGI, including the differences between above ... Read Answer >>
  5. How can I make sure I'm ready to file my taxes?

    Whether you file your return yourself, or have it done by a tax professional, you want to make sure you include all your ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center