How much will I need to try to come up with to be able to itemize when I file my taxes?

Answer 1

Single $5,150, married $10,300, head of household $7,550.

Answer 2

You are ABLE to itemize even if you don't have any itemized deductions. You will only BENEFIT from itemizing if your itemized deductions are more than the standard deduction for your filing status. For the 2006 tax year, the return due April 16, 2007 (April 15 is a Sunday), the standard deductions are as follows:
Single: $5,150
Married Filing Separately: $5,150
Married Filing Jointly: $10,300
Qualifying Widow(er): $10,300
Head of Household: $7,550

Answer 3

You can deduct only certain amounts of some types of itemized deductions. The amount you can deduct is based on different limits, depending on the type of itemized deduction.

Our tax software figures these limits for you and reduces your deductions where appropriate.

Floors

Most of the limits are figured using a percentage of your adjusted gross income (AGI).

Your actual deduction will be calculated by taking your total expense, for that type of deduction, and then subtracting the appropriate percentage of your AGI.

For example, your miscellaneous itemized deductions must be greater than 2% of your adjusted gross income before you get a tax benefit for any of those expenses.

This type of percentage limit is called a floor, because you have to come up to the floor before you can start deducting any of the expenses.


Itemized deductions

Here are some of the expenses you can deduct and their limitations:


Medical and dental expenses

As a general rule, you can deduct any expense you pay for the prevention, diagnosis, or medical treatment of physical or mental illness, and any amounts you pay to treat or modify any structure or function of the body for health purposes (but not for cosmetic reasons). You can also deduct transportation costs for getting to where you can receive this kind of medical care, your health insurance premiums, and your costs for prescription drugs and insulin.

Your medical expenses must equal at least 7.5% of your adjusted gross income before they give you a tax benefit. This means that the medical expenses needed to meet the 7.5% floor don't give you a tax benefit.

Interest expense

Interest on both your primary residence and one other residence is deductible.

The limits on deductible home mortgage interest expense are:

You can deduct interest on up to $1,000,000 in acquisition debt (which usually is your original mortgage).

You can deduct interest on up to $100,000 in home-equity debt.

Personal interest (such as credit card debt) is not deductible. However, the Taxpayer Relief Act of 1997 gave us new law that might allow you to deduct interest paid on student loans beginning in 1998. The best part about the new law is that you can take the deduction even if you don’t itemize deductions.


Charitable contributions

Deduct your charitable contributions in the year you make them. For most contributions, the maximum you can deduct in one year is 50% of your adjusted gross income. However, there are certain types of contributions that have a limit of 20% or 30% of your adjusted gross income.

If your contributions go over the limit, you can carry the unused deduction forward to the next tax year. However, be sure to enter all of your contributions on this year’s return, or the IRS won’t know why you are claiming a carryover deduction next year.


Casualty and theft losses

For most personal casualties and thefts, deduct the loss in the year it happened. If you have a loss in a federally declared disaster area, you might be able to deduct the loss in another year.

The limit on casualty and theft loss deductions, for non-business property, is:

The total of your casualty and theft losses must be more than 10% of your adjusted gross income (AGI), plus $100, before you will receive a tax benefit.

Miscellaneous deductions

Miscellaneous deductions are usually unreimbursed employee expenses or business and investment expenses.

The total of your miscellaneous deductions must be more than 2% of your adjusted gross income before you can start deducting anything.

The floor on miscellaneous deductions is 2% of your adjusted gross income.

Let’s say your adjusted gross income is $10,000, so 2% of $10,000 is $200. This means that to meet the 2% floor, you must have at least $200 in miscellaneous expenses.

However, only the amount over the $200 actually reduces your taxable income.

Now let’s say that you have $500 in miscellaneous expenses. The first $200 meets the 2% floor limit, leaving you with $300 that you can deduct from your taxable income.