Schedule A (Taxation) - Explained
What is Schedule A?
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What is Schedule A?
In the United States, taxpayers file their annual income tax returns with the Internal Revenue Service (IRS) using the standard 1040 form. Schedule A is an attachment to 1040 form that allows taxpayers to report eligible expenses or itemized deductions that will help them reduce their tax liabilities. In addition to filing a 1040 form, taxpayers who accrued expenses that can make them eligible for tax deductions can file them using Schedule A.
How Is Schedule A Used?
Generally, the eligible expenses or itemized deductions that individuals can file on a Schedule A are in seven categories. Expenses outside the designated categories are not recognized for tax deduction purposes by the IRS. These categories are;
- Expenses on charity
- Medical dental expenses
- Job expenses
- Interest individuals pay
- Taxes individuals pay
- Casualty and theft losses, and
- Other miscellaneous deductions.
The Schedule A form is optional, that is, taxpayers can choose to attach it to their Standard 1040 form or otherwise. When using Schedule A, taxpayers apply for deductions using the category that will yield the highest deductions. Through Schedule A, taxpayers adjusted gross income (AGI) are reduced after itemized deductions have been made. Aside from the categories of itemized deductions that are allowed on the Schedule A, there are guidelines on where taxpayers are expected to list their deductible expenses. Itemized deduction is an alternative to standard deduction that is subtracted from the AGI of taxpayers. Using itemized deductions allows a taxpayer use the deduction category that will give the highest deduction but this also means that the taxpayer must keep track of all deductible expenses. Keeping record of deductible expenses is a daunting task, this is why many taxpayers used standard deduction rather than itemized deductions. Taxpayers who use itemized deductions must keep all receipts, invoices and cheques showing their expenses deductible. Taxpayers who itemize their deductible expenses enjoy more tax deductions than those who use the standard deduction. In some cases, taxpayers opt for itemized deductions when the total amount deductible using standard deduction is less than the amount deductible using itemized deductions. Expenses that are eligible for tax deductions include medical expenses, dental expenses, gifts to charity, losses to casualty and theft losses and others. Generally, tax payers calculate the amount deductible from their taxes using both standard deduction and itemized deduction and select the option with the highest deduction.