What Is Schedule A (Form 1040 or 1040-SR): Itemized Deductions?
Schedule A (Form 1040 or 1040-SR): Itemized Deductions is an Internal Revenue Service (IRS) form for U.S. taxpayers who choose to itemize their tax-deductible expenses rather than take the standard deduction.
The Schedule A form is an optional attachment to the standard 1040 form that U.S. taxpayers use to report their annual income taxes.
- Schedule A is the tax form used by taxpayers who choose to itemize their deductible expenses rather than take the standard deduction.
- Tax law changes in 2017 as a result of the Tax Cuts and Jobs Act (TCJA) eliminated many deductions and also nearly doubled the amount of the standard deduction.
- Many taxpayers who itemized their deductions on Schedule A prior to the TCJA have found it more advantageous (not to mention easier) to claim the standard deduction.
Who Can File Schedule A (Form 1040 or 1040-SR): Itemized Deductions?
A number of deductions that were once available to taxpayers disappeared with the Tax Cuts and Jobs Act passed in 2017. They include deductions for casualty and theft losses not in a disaster area; interest on home equity loans that were used for purposes other than buying, building, or improving a home; and "miscellaneous deductions," which included tax preparation fees and job-related expenses that an employer didn't reimburse.
The new law also limited the amount that taxpayers can deduct for state and local taxes to a maximum of $10,000, or $5,000 for married taxpayers filing separately. At the same time, the law nearly doubled the standard deduction. The figures are adjusted annually:
- For the tax year 2020, the standard deduction for single taxpayers and married couples filing separately is $12,400. For married couples filing jointly, it is $24,800, and for heads of households, it is $18,650.
- For the 2021 tax year, the standard deduction for single taxpayers and married people filing separately is $12,550. For couples filing jointly, it is $25,100. For heads of households, it is $18,800.
As a consequence of these changes, many taxpayers who itemized their deductions on Schedule A in years past have found it more advantageous (not to mention easier) to claim the standard deduction.
Who Benefits From Filing Schedule A (Form 1040 or 1040-SR): Itemized Deductions?
For residents of high-tax states, the $10,000 limit on deducting state local taxes alone may be the deciding factor. If a married couple can't scrape up at least another $14,000 in eligible deductions on top of the $10,000, they'll be better off taking the standard deduction.
That was already the case for the majority of taxpayers, whose eligible deductions added up to less than the standard deduction even under the old rules. They have the added advantage of not needing to keep track of their expenses or collect piles of receipts. What's more, itemized deductions are subject to challenge by the Internal Revenue Service (IRS), while taking the standard deduction is not.
Taxpayers with big mortgages might still come out ahead by itemizing deductions on the Schedule A form.
However, if a taxpayer still has enough eligible expenses to exceed the standard deduction, filing Schedule A continues to make sense. For taxpayers with the highest home prices, mortgage interest is a good benchmark for deciding which deduction to choose. If your annual mortgage interest (as reported to you by your bank on a Mortgage Interest Statement, or Form 1098) is higher than the standard deduction, it is already to your advantage to itemize deductions instead of filing for the standard deduction.
If you're thinking of buying a new home, note that the law now limits deductible mortgage interest to the first $750,000 of debt for any loans taken out after Dec. 15, 2017. Previously, the limit was $1 million.
All versions of Schedule A are available on the IRS website.
How to File Schedule A (Form 1040 or 1040-SR): Itemized Deductions
The instructions for Schedule A explain which of your expenses are deductible and where they should be listed on the form.
Schedule A requires taxpayers to list their deductible expenses in any or all of six designated categories:
- Medical and dental expenses
- Taxes you paid
- Interest you paid
- Gifts to charity
- Casualty and theft losses (but only if the property is located in a federally-declared disaster area)
- Other itemized deductions
Like the standard deduction, the itemized deductions on Schedule A are subtracted from the taxpayer's adjusted gross income (AGI) to determine taxable income.
As has always been the case, if you elect to itemize your deductions, you need to save documentation of eligible expenses throughout the year. These may include receipts, invoices, and images of canceled checks.