Federal Income Tax Itemized Deduction
Each year, the federal government gives taxpayers the opportunity to deduct certain expenses from their taxable income to reduce their tax bill. These deductions can be divided into two categories: Above-the-line deductions and itemized deductions. Above-the-line deductions can be taken regardless of whether the standard deduction is used. Taxpayers must choose to take the total of the itemized deductions or to take the standard deduction.
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Standard Deduction
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The standard deduction changes annually based on the cost of living and depends on your filing status. For 2009, if you are single or married but filing separately, your standard deduction is $5,700. If you are a head of household, you can take $8,350. For married individuals who file a joint return, you can deduct $11,400.
Medical Costs
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If your medical costs exceed 7.5 percent of your adjusted gross income, any amount over this threshold can be used as an itemized deduction. Medical expenses include preventative care, treatments and any insurance costs that are paid out of pocket.
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Donations to Charity
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The value of goods, property or cash that is donated to charity can be used as an itemized deduction. The amount of the deduction is the value of all of your contributions minus any tangible benefits you might have received in return.
Business Mileage
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If you drove your vehicle for business purposes but were not reimbursed, you can use the standard mileage rates to calculate your deduction. For 2009, the business mileage rate is 55 cents a mile.
State and Local Taxes
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Any state or local taxes you pay can be used as an itemized deduction. These taxes include income taxes, property taxes and sales taxes.
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