topic Itemized Deductions in Deductions & credits

Itemized Deductions

Myclock55 — Thu, 21 May 2020 23:41:55 GMT

Turbo Tax is telling me that the standard deduction is my best option. I have Mortgage interest of $37K, Real Estate Taxes in excess of 10K and State taxes over $20K, not to mention charitable deduction. When I look at the forms there is no Schedule A. Is there something wrong with my application?

Re: Itemized Deductions

Carl — Fri, 22 May 2020 00:38:30 GMT

For one thing, there are limits on your itemized deductions. For example, your itemized deductions for SALT (State and Local Taxes) is limited to $10K. Any SALT paid above that is just flat out not deductible.

Your deductible mortgage interest is limited to the interest paid on the first $750K of your mortgage. So if your outstanding principle balance on your mortgage on Jan 1 of 2019 was higher than $750K, your mortgage interest deducted was reduced to the amount of interest paid on the first $750K of your outstanding balance.

So if you are filing a joint return, that means your "allowed" SCH A deductions do not exceed $24,600.

If you are married and filing a separate return, then you "allowed" SALT and mortgage interest deductions are cut in half.

I have Mortgage interest of $37K,

If your outstanding balance on the loan was more than $750K, then only the interest paid on the first $750K is a SCH A deduction.

Real Estate Taxes in excess of 10K and State taxes over $20K,

Those fall under SALT, and you're limited to deducting $10K of those taxes. That's it.

not to mention charitable deduction.

Many folks mistakenly believe that 100% of their charitable donations are deductible. Just not true. There are two types of charities. 50% charities and 30% charities. TurboTax assumes all of your charitable donations are to a 50% charity. Therefore only 50% of your charitable donations are deductible from your taxable income. If filing MFS, then only 25%.

Re: Itemized Deductions

Hal_Al — Fri, 22 May 2020 13:39:24 GMT

"Therefore only 50% of your charitable donations are deductible from your taxable income."

No exactly.

The first 50% limitation provides that aggregate deductible contributions (including those subject to the separate 20% or 30% limitations) cannot exceed 50% of AGI.

Reference: https://www.thetaxadviser.com/issues/2013/mar/casestudy-mar2013.html