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 derive 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 their 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.

Individuals will opt for itemized deductions if the sum of qualified expenses is more than the fixed amount provided under the standard deduction. 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 2017 was $6,350 for a single tax filer), it is already to your advantage to itemize deductions instead 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 Benefit

    A tax benefit is an allowable deduction on a tax return intended ...
  2. Tax Deductible Interest

    The tax deductible interest is a borrowing expense that a taxpayer ...
  3. Above The Line Deduction

    An above the line deduction is an item that is subtracted from ...
  4. Educator Expenses Deduction

    The educator expenses deduction is an adjusted gross income deduction ...
  5. Domestic Production Activities ...

    The domestic production activities deduction was intended to ...
  6. Write-Off

    A reduction in the value of an asset or earnings by the amount ...
Related Articles
  1. 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.
  2. Taxes

    Making Sense of the 2017 Tax Changes

    Here is a brief overview of some of the changes introduced by the Tax Cuts and Jobs Act of 2017, and how they may affect your taxes.
  3. Taxes

    9 Ways the New Tax Law Affects Millennials

    The new tax bill, the Tax Cuts and Jobs Act, includes some important changes for Millennials.
  4. Taxes

    Who Loses Under the New Tax Provisions? Homeowners

    The tax code overhaul reduces the tax advantages of owning a home.
  5. 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.
  6. Taxes

    Insurance-based Tax Deductions You May Be Missing

    Do you know about all these insurance-related deductions? Knowing the tax deductions you're entitled to can make or break your bank account.
  7. Taxes

    Are You Getting a Tax Deduction for Your Donation?

    When done properly, a charitable donation of your RMD can equal a tax deduction for you.
  8. Taxes

    10 Tax Benefits for the Self-Employed

    Running your own business has both personal and financial perks.
  9. Taxes

    7 Commonly Overlooked Tax Deductions

    Don't pay more taxes than you have to because you've missed taking legitimate tax deductions. Here are just a few you may have overlooked.
  10. Taxes

    The Tax Deduction You Can't Afford to Miss

    If you live in a state without income taxes make sure you don't miss out on this deduction.
RELATED FAQS
  1. 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 >>
Hot Definitions
  1. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  2. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  3. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  4. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  5. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  6. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
Trading Center