What Are the Limitations of Itemized Deductions?

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Most taxpayers can choose between taking the standard deduction or itemizing their deductions when they file their annual income tax return, according to the U.S. Internal Revenue Service (IRS). The IRS recommends taxpayers consider both methods and choose the method that requires the lowest tax obligation. There are numerous expenses that may be deducted if a taxpayer chooses to itemize, but many categories include certain limitations.

Filing Status

  • Some taxpayers do not have an option regarding whether to claim the standard deduction or to itemize deductions. Married couples who file separate returns under the Married Filing Separately filing status may not claim different types of deductions. If one spouse chooses to itemize deductions, the other spouse does not have the option of choosing the standard deduction, but must also itemize deductions, according to the Internal Revenue Service's Tax Tip 2010-48.

Income

  • A taxpayer's ability to fully utilize his itemized deductions may be limited if his adjusted gross income (AGI) exceeds the amount determined by the tax code for the previous tax year, according to the Internal Revenue Service. The amount of income allowed before itemized deductions are limited may vary from year to year. For the 2009 tax year, the maximum amount of AGI was $166,800, or $83,400 for married taxpayers filing separate returns.

Limited Categories

  • According to IRS Publication 17, "Your Federal Income Tax," you report itemized deductions on Schedule A of Form 1040. In addition to any overall limitations on itemized deductions, there are also limitations on certain categories of deductions. For the 2009 tax year deductions for medical expenses were limited to amounts greater than 7.5 percent of the taxpayer's AGI. The itemized deduction for mortgage interest paid may be limited if the underlying property does not meet one of the three categories listed in Chapter 23, "Interest Expense; Home Mortgage Interest" of IRS Publication 17. There may be limitations on the amount of deductions allowed for taxes paid, charitable contributions, job expenses and other miscellaneous deductions.

References

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