What Is Schedule A?
Schedule A is an income tax form that U.S. taxpayers use to report their itemized deductions, which can help reduce their federal tax liability.
A Schedule A form is an optional attachment to the standard 1040 form for U.S. taxpayers paying their annual income taxes. Claiming itemized deductions is an alternative to taking the standard deduction, and taxpayers can use whichever option will give them greater tax savings.
- Schedule A is an optional tax form for taxpayers who want to itemize their deductions rather than take the standard deduction.
- Tax law changes in 2017 eliminated some deductions and also raised the amount of the standard deduction.
- Many taxpayers who once used Schedule A will now find that claiming the standard deduction is more to their advantage.
Understanding Schedule A
Schedule A asks taxpayers to list their deductible expenses within six designated categories: Medical and Dental Expenses, Taxes You Paid, Interest You Paid, Gifts to Charity, Casualty and Theft Losses (but only if property is located in a federally declared disaster area), and Other Itemized Deductions. Like the standard deduction, the itemized deductions on Schedule A are subtracted from a taxpayer's adjusted gross income (AGI) to determine their taxable income.
All versions of Schedule A are available on the IRS website.
The instructions for Schedule A explain which of your expenses are deductible and where you should list them on the form.
A number of deductions that were once available to taxpayers no longer are, as the result of the Tax Cuts and Jobs Act, passed in 2017. Those 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 your home; and what were formerly called "miscellaneous deductions," including tax preparation fees and job-related expenses that an employer didn't reimburse you for. The new law also limited the amount that taxpayers can deduct for state and local taxes to a maximum of $10,000 ($5,000 for married taxpayers filing separately).
At the same time, the law nearly doubled the standard deduction, increasing it from $6,350 for single filers in 2017 to $12,000 for single filers in 2018. For married couples filing jointly, the standard deduction rose from $12,700 to $24,000. Each year, the standard deduction receives an inflation adjustment increase.
Special Considerations for Schedule A
As a consequence of all these changes, it's likely that many taxpayers who have itemized their deductions on Schedule A in years past will now find it more advantageous simply to claim the standard deduction. For residents of high-tax states, for example, the new $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 their standard deduction of $24,000.
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 had 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 simply the taxpayer's right.
Taxpayers with large mortgages might still come out ahead by itemizing their deductions and filing a Schedule A form.
However, if a taxpayer still has enough eligible expenses to exceed the standard deduction, filing Schedule A will continue to make sense. For taxpayers with large mortgages, mortgage interest will be 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 interest on the first $750,000 of debt for any loans taken out after Dec. 15, 2017. Previously, the limit was $1 million.)
As has always been the case, if you do elect to itemize your deductions, be sure to save documentation of your eligible expenses throughout the year: receipts, invoices, images of cancelled checks, and so forth.