Itemized Deductions
If your deductible personal and family expenses, as defined by the IRS, add up to more than the standard deduction for your filing status, and you have the records to prove them, you should itemize your deductions instead of claming the standard deduction. To do that, you'll have to file Form 1040, and complete Schedule A and attach it to your tax return.
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As a general rule, most taxpayers who own their own homes will come out ahead by itemizing; those who don't are unlikely to be able to itemize unless they have extraordinary amounts of medical expenses, charitable gifts, or casualty losses during the year.
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Schedule A divides your itemized deductions into six major categories:
Interest. Two major categories of interest payments are deductible on Schedule A: qualified home mortgage interest, and investment interest.
Some other types of interest are deductible in other places on your tax return. Business-related interest payments are deducted on Schedule C, interest on rent-producing property is deductible on Schedule E, and, as of 1998, qualified student loan interest is deductible on Line 24 of your Form 1040 .
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When using CompleteTax to pull together your personal tax-related information, most of the items that are discussed in this section should be entered in the "Deductions" section of CompleteTax.
The major exception to this rule is deductible interest, which should be reported according to the type of loan for which it was paid. Home mortgage or investment real estate interest should be reported in the "Real Estate" section; other investment interest should be reported in the "Investment" section; business-related interest should be reported in the "Business" tab of the "Employment" section; and qualified student-loan interest should be reported in the "Other Expenses" tab of the "Miscellaneous" section.
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