An individual taxpayer may utilize a standard deduction or itemized deductions (whichever one is greater) to reduce the adjusted gross income, which ultimately would decrease the taxable income amount. Itemized deductions are a specific list of items that are placed on schedule A.
Itemized deductions are broken down into seven different categories:
- Medical Expenses
- Medicine, premiums, required surgery
-Only expenses on behalf of individual taxpayer and dependents
- Taxes
-State, local and foreign taxes
-Sales taxes
- Interest Paid
-Home mortgage and investment interest expenses
- Gifts to Charity
-Both Cash and Property
- Casualty and Theft Losses
-Only events that are sudden and unexpected
- Job Expenses
-Some examples
-Unreimbursed business expenses
-Business Gifts
-Educational expenses
- Other Miscellaneous Items
-Gambling losses