TAX Resources » Tax$avers

Itemized Deductions

Must-know deductions for every taxpayer

How do you know whether you are capturing all the deductions you are allowed to effectively reduce your taxable income?
Itemized deductions are captured on Schedule A as an alternative to taking the standard allowable deduction. To determine which is more favorable for your situation, it is often best to calculate your return both ways.
Generally, if you own your own home you will itemize deductions. To help you gather and retain the correct records, a checklist is provided here for your use. While the list is not all inclusive, it should give you a good starting point.

Medical & Dental Costs

Medical and Dental expenses are generally deductible to the extent they exceed 7.5% of your income. Some of the more common expenses:

  • adoption
  • birth control pills (prescribed)
  • doctor/dentist fees
  • drug/alcohol treatment
  • guide dog costs
  • handicap access devices for disabled
  • hospital fees
  • insurance premiums
  • prescriptions
  • laser eye surgery
  • lead based paint removal cost
  • life-care fees for medical treatment
  • longterm care ins prem.
  • meals/lodging related to hospital stays
  • medical devices
  • operations
  • organ donation
  • physician diet/health programs
  • psychiatric care
  • school and/or home for disabled
  • smoking cessation program cost
  • special life items:
    (glasses, limbs, dentures, wheelchairs, hearing aids, contacts, etc.)
  • transportation (medical related)
  • weight loss programs cost


The following taxes are generally 100% deductible.

  • state/local taxes
  • property taxes
  • payments to mandatory state funds
  • foreign income taxes
  • real estate taxes
  • value based auto license fee

Interest Expense

While most personal interest is no longer deductible (credit card interest, car loans, and the like), there are still interest expense deductions available to you.

  • home mortgage interest
  • 2nd home mortgage interest
  • home equity loan interest
  • interest on special assessments (as real estate tax)
  • business interest
  • investment interest
  • “points” paid

Charitable Contributions

(donating money or property)
Both cash and property are generally deductible if donated to qualified organizations. Qualified organizations include:

  • churches
  • non-profit schools
  • non-profit hospitals
  • public parks
  • boy & girl scouts
  • war/veterans groups
  • agencies such as: Red Cross, Salvation Army, Goodwill, CARE,
    United Way etc.
  • some environmental/conservation groups

Tax$aver Tip: Make sure you also keep track of your mileage to and from the charity. It is also deductible.

Casualty & Theft Losses

Casualty and Theft losses are generally deductible to the extent they exceed 10% of your adjusted gross income, are not reimbursable via insurance, and each event exceeds $100.

  • fire
  • theft
  • natural loss: tornado, hurricane, flood, etc.
  • car accident
  • vandalism
  • other accidents

Miscellaneous Deductions

Most miscellaneous deductions are only deductible to the extent they exceed 2% of your adjusted gross income. Items with an “*” are usually not subject to the income threshold.

  • gambling losses to offset gains*
  • handicapped job related expenses*
  • work uniforms
  • un-recovered annuity costs*
  • job hunting expenses
  • safe deposit box cost
  • tax prep fees
  • employee business expenses
  • hobby exp. to offset gains
  • 50% of business related meals; entertainment
  • classroom material expense for teachers
  • repayments of income*
  • repayments of Social Security
  • investment related expenses
  • in-home office expenses
  • IRA/KEOGH administration fees
  • business use depreciation
  • certain legal fees
  • trust administration fees
  • job required medical exam
  • job required education expenses

Non-deductible Expenses

The following are non-deductible items:

  • accidental damage
  • blood donation
  • club dues
  • commuting expenses
  • cosmetic surgery
  • drought losses
  • estate/gift taxes
  • funeral expenses
  • gifts to foreign organizations
  • gifts to “for profit” groups
  • gifts to individuals
  • home repairs
  • labor union donations
  • license fees
  • life insurance prem.
  • lost property
  • non-essential education
  • non-health related: household help, health club dues
  • PAC donations
  • political donations
  • property assessments
  • raffle tickets
  • sales taxes
  • Soc. Sec./Medicare
  • tax penalties
  • termite/insect damage
  • tickets and fines

New as of 2002: If you are a teacher you can deduct up to $250 in non-reimbursed classroom expenses. This deduction is available even if you do not itemize deductions on your tax return.

Tax Savings Tips

Tax$aver Tip #1: Expense Shifting

Whenever possible shift expenses into categories of itemized deductions to surpass the IRS thresholds in a given year.

Example: You have surgery during the year resulting in high medical costs for that year. The IRS 7.5% of income threshold is surpassed, so every incremental Medical and Dental expense is now deductible. If possible, now is a good time to get eyes checked, to get family physicals, and to get other medical and dental work completed. Next year you will have to again reach the 7.5% threshold before you can deduct the expense. The same holds true for thresholds related to Casualty/ Theft losses and Miscellaneous Deductions.


Tax$aver Tip #2: Miles, Miles, Miles

Capture all your mileage for business travel, charitable travel, and medical travel. Keep a log book in your car and note the miles to and from the doctor or dentist. Track the miles to drop off charitable donations, or to go to and from your charity. This area of deductible expense is often not taken or is poorly captured.

Tax$aver Tip #3: Missing a few things

What is deductible? What is not? When in doubt save the canceled check, the proof of payment, and/or receipt. Without the proof, the expense cannot be taken.

Tax$aver Tip #4: Non-cash donations

How many times have you dropped off a bag of clothes or an old lamp and not kept record of the gift? All of these donations are deductible and not subject to a minimum threshold as with medical expenses or miscellaneous deductions. Keep a list of items you plan to give away. Put the list next to or inside the bag of items you plan to drop off. The required itemization of items donated can be prepared when the bag is ready to be dropped off at your favorite charity.


Tax$aver Tip #5: Receipts, Receipt, Receipts

Often during IRS audits, deductions are disallowed because proper documentation of the expense is not retained. Keep all canceled checks, receipts, and statements related to your expense.