An overview of itemized tax deductions and their limitations electricity in the 1920s


For example, if you’re a single filer and you had total itemized deductions of $7,350 in 2017, you’d be better off going to the trouble of itemizing because this takes $1,000 more off your taxable income than the $6,350 standard deduction. ​But if you qualify as head of household, you’d end up paying taxes on an additional $2,000 if you itemized —the difference between $7,350 in itemized deductions and the the $9,340 standard deduction you’d be entitled to claim for this filing status.

But there’s a potential wrinkle on the horizon. The Tax Cuts and Jobs Act that Congress is in the process of mulling over as of December 2017 would radically change the standard deduction amounts for 2018. The House of Representatives wants to increase the standard deduction to $12,200 for single filers, to $18,300 for heads of household, and to $24,400 for married taxpayers who file joint returns. The Senate is in the same ballpark: $12,000 for single filers, $18,000 for heads of household, and $24,000 for married taxpayers who file jointly.

Sometimes the decision to itemize or to claim the standard deduction is out of your hands. Married couples who file separate tax returns must each use the same method. They must both take the standard deduction or they must both itemize, so if your spouse itemizes, you’re stuck with doing so as well unless you can convince him to change his mind.

​The list of qualifying deductions is fairly extensive, and limitations apply to some of them. Generally, you can claim itemized deductions in the following categories, but some of these are subject to change as well under the pending legislation. And this list is by no means comprehensive. There are a few additional, less utilized itemized deductions.

• Home mortgage interest (capped at mortgage debts of $500,000 by the House version of the Tax Cuts and Jobs Act; the Senate’s version retains this deduction but limits it to acquisition debt only, not equity debt as has historically been the case)

​​​Medical and dental expenses include the cost of insurance premiums as long as your employer doesn’t reimburse you for them, as well as certain qualifying medical and dental care costs. But you can only deduct the portion that exceeds 10 percent of your adjusted gross income as of 2017.

This means that if your AGI is $55,000 and you had $7,500 in qualifying medical expenses, your deduction would be limited to $2,000: the amount that exceeds $5,500 or 10 percent of your AGI. The Senate’s version of the Tax Cuts and Jobs Act would decrease this limit to 7.5 percent, but only for two years. Other Limitations on Itemized Deductions

Itemized deductions are also limited when a taxpayer’s AGI exceeds certain limits based on his filing status. These limits are sometimes called Pease limitations because Representative Donald Pease first authored the legislation that provides for them back in 1990. For 2017, Itemized Deductions Start to Phase Out When AGI Reaches

The total amount of the itemized deductions you can claim is reduced if your AGI exceeds the limit for your filing status. The reduction is either 3 percent of the amount by which your AGI exceeds the threshold or 80 percent of your total itemized deductions, whichever is less. You don’t have to include deductions claimed for medical expenses, investment interest, casualty or theft losses, or gambling losses when you’re calculating 80 percent of the total—at least as of 2017. This may change somewhat with the new tax legislation as well.

Tax laws change periodically and the above information may not reflect the most recent changes. Please consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice and it is not a substitute for tax advice.